The Economist - UK (2022-03-26)

The Economist March 26th 2022 71

Finance & economics

Greencommodities

The new superpowers

I

n mid­februaryRussia  seemed  on  the

verge  of  a  revolution  with  a  distinctly

reddish tint. Alisher Usmanov, an oligarch,

was developing Udokan, a copper mine in

Siberia  that  required  removing  an  entire

mountain  top.  In  the  Arctic  tundra  Kaz

Minerals,  a  mining  firm,  had  raised

enough  cash  to  build  Baimskaya,  a rival

mine so remote that it needed its own port,

icebreaker  and  floating  nuclear  plant.  For

years the projects had been put on hold be­

cause of their immense costs. But expecta­

tions  of  soaring  demand  for  copper,  used

in  everything  from  grids  to  turbines,  had

boosted  prices  of  the  auburn  metal,  mak­

ing the mines viable. 

Now  the  copper  price  is  even  higher.

But the projects are in trouble. Insiders say

they  are  short  of  vital  foreign  equipment

that  has  been  blocked  by  the  West  after

Russia’s invasion of Ukraine, and that they

are starved of the funds they had expected

from  blacklisted  Russian  banks.  Mr

Usmanov,  too,  faces  sanctions.  A  spokes­

man for Udokan says, “We are doing every­

thing  we  can  to  ensure  business  continu­

ity.”  Yet  even  if  the  mine  starts  producing

this year as planned, it is unclear who will

buy  its  output.  Foreigners,  even  the  Chi­

nese, are shunning Russian production. 

As the world weans itself off dirty fuels,

it  must  switch  to  cleaner  energy  sources.

The International Energy Agency (iea), an

official  forecaster,  predicts  that  wind  and

solar could account for 70% of power gen­

eration by 2050, up from 9% in 2020, if the

world embarks on a course to become car­

bon­neutral  by  2050.  That  translates  into

huge  demand  for  the  metals,  such  as  co­

balt,  copper  and  nickel,  that  are  vital  for

the technologies underpinning everything

from  electric  cars  to  renewables;  theiea

reckons that the market size of such green

metals  would  increase  almost  seven­fold

by  2030.  And  much  like  fossil­fuel  re­

serves, these commodities are distributed

unevenly  (see  chart  1  on  next  page).  Some

countries  have  none  at  all.  Others  are

blessed with vast deposits. 

The metals rush will not be as big as the

oil­and­gas  boom  that  toppled  King  Coal

after  the  second  world  war.  But  there  are

some  echoes  with  the  past.  Between  1940

and 1970 the share of hydrocarbons in the

energy  supply  of  rich  countries  rose  from

26% to nearly 70%. Once­marginal econo­

mies in the Middle East were transformed

into  uber­rich  petrostates.  Between  1970

and  1980  the  gdpper  person  of  Qatar  and

Saudi  Arabia  grew  12­  and  18­fold,  respec­

tively.  Bedouin  villages  became  boom

towns;  fishing  dhowsgave  way  to  super­

tankers and luxury yachts. 

This  time  the  transition  will  bring

windfalls  to  countries  we  dub  the  “green­

commodity  superpowers”.  We  calculate

that  this  club,  many  of  which  are  poor

economies  and  autocracies,  could  pocket

more than $1.2trn in annual revenue from

energy­related metals by 2040. 

With  the  opportunity,  however,  come

KOLWEZI, PARIS AND SAN PEDRO DE ATACAMA

Meet the commodities giants vying to power the energy transition

→Alsointhissection

74 Oil whipsaws

74 InvestorsgettheChinajitters

75 Buttonwood:London-basedfiascos

76 Millennialsandthehousingboom

77 Free exchange: Carbon prices