Metal Demand Has a Bright Future in 2021 and Beyond

Jacob Hess

January 11, 2021

• Commodities
• Green

One of the stories of 2020 was the immensely impressive rise in Tesla’s (TSLA) stock price. Shares of the electric car company rose about 720% as it made headlines month after month and eventually catapulted Elon Musk to become the richest man in the world at the beginning of 2020. The hype surrounding Tesla is representative of a greater overall trend of innovation in green energy. A trend that has transformed from being driven by speculation of what it could become to being driven by demand for the new products being created.

S&P author Jim Wiederhold hints at this in his “Reflecting on the Inflections Points of 2020” reviewing S&P GSCI Sector Commodities and their performance over 2020. The article reports that S&P GSCI Precious Metals and S&P GSCI Industrial Metals were the best performing of the 6 indexes with Precious Metals up over 20% and almost 70% higher than the worst-performing Energy Index. Some Precious Metal highlights were gold and palladium up above 20%, platinum up about 10%, and silver surging 47%. Analysts in a Reuter's article suggest the bull market will continue into 2021 with the potential for these precious metals to reach new highs.

Indeed, the S&P report notes that “green technologies were building momentum for years, but 2020 might be the inflection point where they truly took off.” That inflection point might also be the reason behind TSLA’s wild surge. Both components of the Industrial Metals index and the Precious Metals index are used in “low-carbon technologies” which include wind turbines, solar panels, carbon capture, electric vehicles, and energy storage. The chart from the World Bank illustrates how so many green technologies will rely on the supplies of these metals to flourish. This was highlighted in an in-depth report from 2017 which suggested “The shift to low carbon energy will produce global opportunities with respect to a number of minerals.”

The World Bank’s analysis assumed that the 2015 Paris Agreement on Climate Change and the progressions of the global resolution would lead to a cohesive increase in demand for metals and minerals used in green technologies. It analyzed three different scenarios that suggested there would be an increase in renewable energy generation in the range of 14-44% in the next 80 years. In that same analysis, it suggested some demand for metals could rise by as much as 1000% in that period. In some specific models looking at wind and solar energy, metals including aluminum, chromium, copper, indium, iron, lead, manganese, molybdenum, neodymium, nickel, silver, and zinc could see demand growth of 150% (on the low end) through 2050.

Of course, this was based on an agreement set in 2015 in a time that the global climate crisis didn’t seem as urgent as it does now. Scientists have stated that 75% of current plans in place are inadequate in reaching the goals set by the 2015 Paris Agreement on Climate Change. All signs point to the “inflection point” steepening in 2021 as innovation in the green space continues and green policies continue to encourage more low-carbon technologies to come online.