New Energy Weekly – The International Energy Agency
I want to revisit one of our most important investment ideas in 2023
In 2023, we will continue to see high demand for metals like copper, nickel, and tin. The International Energy Agency (IEA) produced a report that puts the demand into sharp detail. They predict a doubling of demand for clean energy by 2040:
The types of mineral resources used vary by technology. Lithium, nickel, cobalt, manganese and graphite are crucial to battery performance, longevity and energy density. Rare earth elements are essential for permanent magnets that are vital for wind turbines and EV motors. Electricity networks need a huge amount of copper and aluminium, with copper being a cornerstone for all electricity-related technologies.
The shift to a clean energy system is set to drive a huge increase in the requirements for these minerals, meaning that the energy sector is emerging as a major force in mineral markets. Until the mid-2010s, for most minerals, the energy sector represented a small part of total demand. However, as energy transitions gather pace, clean energy technologies are becoming the fastest-growing segment of demand. In a scenario that meets the Paris Agreement goals (as in the IEA Sustainable Development Scenario [SDS]), their share of total demand rises significantly over the next two decades to over 40% for copper and rare earth elements, 60-70% for nickel and cobalt, and almost 90% for lithium. EVs and battery storage have already displaced consumer electronics to become the largest consumer of lithium and are set to take over from stainless steel as the largest end user of nickel by 2040.
The takeaway is that we need to invest in these minerals sooner rather than later. This is an easy trend to see coming, but a difficult one to act on. Many of these metals come to the market from the large, legacy mining companies. And while they may make money from the production, few of them make money for their investors.
We will spend much of 2023 digging through the small- to intermediate-size mining companies, looking for those that own significant resources. I’m excited because the mining sector remains beaten down. We will have a window to build our positions. And we should look to exit these positions when the hype goes mainstream – when we see the prices of copper and nickel posted on the Bloomberg crawl.
I hope you are as excited as I am about the new year. I’m looking forward to doing the work so that we can profit.
P.S. I recommend you read the IEA executive summary. It has some great charts outlining the opportunities we have in metals.