Miners Tighten Belts Despite Transition Hype

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

• Despite bullish forecasts for metals like lithium and copper, mining investments have dropped for two consecutive years.
• Increased investment in lithium led to oversupply and price crashes.
• While experts predict a $2.1 trillion investment need by 2050 for the energy transition, miners are hesitant due to declining ore grades, slow renewable growth, and uncertainty about future demand.

Demand forecasts for certain metals and minerals dubbed critical are so upbeat that one would expect the companies involved in the extraction of these minerals would be pouring billions in expansion. But they are not. In fact, miners have reduced investments in the past two years.

The Financial Times reported, citing data from S&P Capital IQ, that spending in the mining sector has fallen for two years in a row, in 2023 and 2024, reaching $12.5 billion last year, which was down by 6% on the prior year.

Interestingly, investment in lithium and copper production has been on the rise, with lithium spending marking five consecutive years of growth between 2020 and 2024, and copper investment rising over the same period until last year, when it dipped compared to 2023. That’s hardly a surprise since demand for EVs, a key market for copper, has failed to impress despite the bullish forecasts. The situation is similar with lithium—investment in the metal has risen by an impressive 360% since 2020. This rise in investment, however, has led to tanking prices and consequent production cuts that are now, according to some, threatening a tightening supply situation.

Related: Iran: We Will Not Negotiate With U.S. Under “Pressure and Intimidation”

The Financial Times notes as reasons for the spending curbs higher interest rates, inflation, and lower commodity prices. Indeed, the transition push has put the mining industry in a rather paradoxical situation. The transition cannot happen without a lot more mining. But mining costs money and higher interest rates tend to discourage spending across industries, no matter how bright the outlook happens to be, according to various forecasters. Inflation is related to higher interest rates and, just like them, spares no industry. But there is also the third reason for miners’ decision to not spend more on higher production: prices.

When demand for a certain commodity is high or expected to go high, prices naturally go up, and producers ramp up production to take advantage of this higher demand. The problems begin when the ramp-up happens quickly, tanking prices, which is exactly what happened in lithium. The situation was made more severe by the failure of the EV revolution to materialize, as mentioned above. This likely made copper miners more guarded in their production expansion plans.

Back in 2023, JP Morgan released a report predicting a bright future for mining investors, citing forecasts from the International Energy Agency on the outlook for metals and minerals demand. “Since clean energy technologies such as wind and solar power, electric vehicles (EVs), and electricity networks require significantly larger quantities of metals than traditional energy generation, our current carbon-intensive economy is likely to become much more metals-intensive,” the bank wrote, and it wasn’t wrong. What many overlooked, however, was the fact that events in real life may not follow predictions and forecasts to the letter, which is exactly what happened.

This has not stopped forecasters from forecasting. BloombergNEF late last year released a report saying that the mining industry would need to invest some $2.1 trillion by 2050 to secure all the metals and minerals necessary for hitting the net-zero target. That’s despite the latest real-life evidence of actual EV demand and despite data showing installation of wind and solar is in a slowdown or straight-out decline in some key markets, notably Europe.

Even with no further pro-transition policies, BloombergNEF wrote, “the world could require 3 billion metric tons of metals between 2024 and 2050 to properly build out low-carbon solutions such as electric vehicles, wind turbines, and electrolyzers. That number rises to 6 billion tons to reach net zero in 2050.” This should have had miners rush to spend more on higher production of critical metals and minerals, but they are not doing this.

Some appear to blame short-term thinking. The head of exploration at Vale Base Metals, for instance, told the FT that the absence of more investment was a result of the fact that “In the mining business you’re looking quarter to quarter and looking to see production numbers,” rather than focusing on the long term, which “has to change at some point, there’s only so much you can explore at existing mines.”

Others blame it on “herd mentality,” per the head of metals and mining at BloombergNEF, who told the FT that “you’re likely to fill a room if you’re talking about finding the next big copper deposit” because there was “a lot of herd mentality in exploration.”

The fact is, however, that miners have been having trouble even maintaining current production rates due to declining ore grades. This means they get less metal from the same amount of ore, meaning production is already costlier than it was a few decades ago. On top of this, forecasters are saying more will be needed in the future, a lot more, requiring a lot more spending. Yet, the evidence does not support this outlook. The perception that the transition is moving a lot more slowly than expected has now come to dominate markets—and mining is no exception. With that perception, the wariness of sudden investment moves has become more acute, resulting in less spending on expansion.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com

• China Urges Refiners to Switch From Fuels to Petrochemicals
• China’s Oil Imports Could Rise as Newest Refinery Begins Trial Runs
• Jeff Currie: The World Has Reached Peak Oil Trade

Download The Free Oilprice App Today