Rising Global Metal Demand: Uncovering the Forces Behind the Growth
- Published | 17 September 2024
Introduction
The global demand for metals is surging, fueled by various key drivers, especially in the energy and transportation sectors. As the world shifts towards sustainability, metals are becoming indispensable across industries. Rapid economic growth in emerging markets like China, India, and Brazil has heightened the demand for metals in infrastructure development, manufacturing, and construction. China, the world’s largest consumer of metals, plays a pivotal role with massive infrastructure projects requiring vast amounts of steel and aluminum.
However, despite this strong demand, global metal and steel performance has slowed down in 2024. After a robust 5.7% increase in 2023, output growth has dropped to just 2.2%, primarily due to reduced production in China and India. The global metals and steel industry is expected to remain subdued in 2025, although advanced markets may see a rebound in demand recovery.
The Rise of Clean Energy Technologies
A key factor driving the demand for metals is the global shift toward renewable energy sources to reduce carbon footprints. Clean energy technologies, such as solar, wind, and electric vehicles, rely heavily on metals like copper, aluminum, and rare earth elements. For instance, electric vehicle (EV) battery packs require lithium, nickel, manganese, and cobalt.
Solar panels utilize copper, silicon, silver, and zinc, while wind turbines demand iron ore, copper, and aluminum. According to the International Energy Agency's Net-Zero by 2050 Roadmap, the share of power from renewables is expected to rise from 10% to 60%, leading to a significant increase in metal demand. Long-term prospects for metals like copper and aluminum are particularly bright due to their critical role in sustainability-led technologies, promising higher sales prices and margins for producers.
Infrastructure Development and Urbanization
Developing countries, especially China and India, continue to experience rapid urbanization, fueling the demand for infrastructure projects such as buildings, roads, and transportation systems. These initiatives heavily rely on metals like steel, aluminum, and copper. According to the World Steel Association, global steel demand is expected to grow by 1.7% in 2024, with India emerging as a key driver of this growth. The country’s rapid economic development, urbanization, and growing population will sustain metal and steel production well into the future.
In contrast, China's steel sector faces significant challenges, with producers suffering from liquidity issues in the property market and slower economic growth. This has led to an oversupply of steel, putting downward pressure on prices and margins.
US Metals and Steel Demand Rebounds
In the US, metals and steel demand is expected to rebound after two years of contraction. US basic metals output is forecast to increase by 3.2% in 2024 and 4.5% in 2025, driven largely by government stimulus, such as the Inflation Reduction Act. US metals and steel producers experience a competitive advantage over their counterparts in Europe and Japan. This positions the US market for a more robust recovery in the near term.
European Producers Face Competitive Disadvantages
In contrast, European metals and steel producers face significant hurdles. The sector has been hit hard by high interest rates, industrial recession, and weak external demand. Although Eurozone metals and steel production is expected to rebound by more than 3%, European producers remain at a permanent competitive disadvantage due to higher energy costs. Investment in cleaner production technologies is another challenge, especially as global demand shifts toward more sustainable production.
Technological Advancements and Innovation
Technological advancements are another crucial factor driving the demand for metals. The proliferation of electronic devices such as smartphones, laptops, and tablets has increased the demand for metals like copper, gold, and rare earth elements. Furthermore, cutting-edge technologies like artificial intelligence, robotics, and quantum computing rely on rare and precious metals for efficient functioning. As these technologies continue to evolve, so will the need for specialized metals.
Recent Developments: Decarbonization Strategy
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In July 2024, India's steel ministry unveiled an ambitious decarbonization strategy, requiring $283 billion to transition its existing steel production facilities towards greener methods. The plan sets an ambitious target of increasing the use of renewable energy in the steel sector to 43% by 2029-30.
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In September 2024, imported iron ore stockpiles at 45 major Chinese ports, as surveyed by Mysteel, remained elevated at 153.8 million tonnes as of September 12. Despite the substantial volume, there was a slight week-on-week decline of 254,100 tonnes, or 0.2%, attributed to increased discharge activity at several ports.
Implications and Challenges
The rising global demand for metals presents both opportunities and challenges for the mining and metals industry. While increasing demand offers higher profits, developing new mines and expanding production capacity is capital- and time-intensive, often taking over a decade. The sector also faces environmental, social, and governance (ESG) concerns, such as reducing carbon emissions, ensuring worker safety, and engaging with local communities.
Moreover, the concentration of metal reserves in a few countries poses supply chain risks. For example, over 70% of the world’s cobalt is produced in the Democratic Republic of Congo, while China dominates rare earth element production. Political or economic instability in these regions could severely disrupt global metal supplies.
Conclusion
The global demand for metals is expected to continue growing in the coming years, driven by clean energy technologies, infrastructure development, and technological advancements. However, the slowdown in metal and steel production in 2024 signals
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