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Hello from London, as we head into a busy week of company results.
But before they get out — we expect Shell and Total Energy on Thursday, among many others — Chevron jumped in by announcing late Sunday that its CEO Mike Wirth would stay in place past the company’s mandatory retirement age. You can read Miles McCormick’s story on that here.
In this week’s Energy Source, we look at the coming shortages of metals needed for the energy transition – and how much the supply-demand gap could be mitigated by recycling.
We also look at the latest news out of Beijing, and whether a muted economic recovery there will overshadow China’s oil demand this year.
Thanks for reading. – Leslie Hook
Why can the transmission of energy stop. . . Recycling
There is a lot of concern about how mineral deficiencies can compromise the energy transition. All those transmission lines, wind turbines, and electric vehicle batteries would require a lot more copper, nickel, and lithium—much more than what’s produced today. Or so the common dogma goes.
However, a report from the Energy Transitions Commission sheds new light on this problem, and offers some radical projections for how to reduce the supply-demand gap for metals – by recycling and using materials more efficiently.
Take lithium: by 2030, demand for the metal is expected to be six times higher than current production levels. At this point, the demand for lithium will be 30 percent higher than the projected supply, in the base case scenario.
With widespread recycling and less lithium being used in future batteries, that gap could narrow to just 10 percent — what the report calls a “maximum efficiency” scenario.
Lord Adair Turner, chair of the commission, said demand for these minerals would respond quickly to market signals. “These things move fast,” he said. Even imperfect markets prompt responses.
He added that the impact of battery metal recycling will increase over time as the opportunities for battery recycling increase. “Recycling until 2030, by definition, can only play a relatively small role, because there are only so many[electric vehicles]. . . By 2040 it could make a huge difference.”
The trend is more pronounced for copper and nickel. By 2030, copper demand will exceed supply by 10 percent in the base case scenario. But this gap could reverse if recycling and replacement of copper is too high — which could lead to a slight excess copper supply by 2030, according to projections in the report.
For nickel, a strong shift toward battery chemistries that use less nickel, along with increased recycling, could also lead to a surplus in 2030, it was found.
However, the report’s authors acknowledge that the energy transition will still require a large number of new mines. According to the report, as many as 40 copper mines, 55 nickel mines, and 65 lithium mines may be needed by 2030. Increasing recycling and efficiency will reduce the number of additional mines required.
But even with the significant expansion of metal recycling, new mines will still be needed.
On Monday evening, a closely watched meeting of the Politburo delivered its verdict on China’s economic recovery after the coronavirus pandemic: “Twisted.”
While this wasn’t much of a surprise after China’s GDP growth in the second quarter was much lower than expected, the statement is troubling for those who were counting on a stronger recovery.
The critical question is how the sluggish economy will affect Chinese demand for oil. So far this year, demand has raced economic growth, rising to an all-time high in April.
Much of this appears to be related to the physical demand, as people start to drive and fly again after the pandemic lockdown last year. Sinopec, China’s largest seller of gasoline and jet fuel, reported that sales of petroleum products rose 28 percent during the second quarter of 2023, compared to a year earlier.
“The recovery is going very slowly, and yet the oil demand data has been incredibly strong,” said Neil Beveridge, senior analyst at Bernstein in Hong Kong.
But will that continue until the second half of this year? Much depends on the answer: China is expected to account for 70 percent of all global oil demand growth this year, according to the International Energy Agency.
The International Energy Agency projects that global oil markets will tighten in the second half of 2023, and expects Chinese oil demand to continue at more than 16.3 million barrels per day – hovering near April’s record levels.
But with the grim readings from Monday’s Politburo meeting, that projection may soon start to look very rosy.
Energy Source is written and edited by the Financial Times’ global energy team. Reach us on email@example.com And follow us on Twitter at @employee. Follow previous issues of the newsletter here.
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