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1、McKinsey on RiskNumber 13,October 2022The net-zero materials transition:Implications for global supply chainsThe metals and minerals industries must adapt their supply chains to provide critical materials for the energy transition.AuthorsPatricia Bingoto Michel Foucart Maria GusakovaThomas Hundertma
2、rkMichel Van HoeyJuly 2023Materials Practice1Materials transition:Implications of the net-zero transition on global supply chainsIncreasingly bold climate targets are changing global materials supply chains,to the extent that the transition to a net-zero emissions economy has sparked a“materials tra
3、nsition.”This report aims to provide an integrated perspective on these supply-chain changes,including materials demand,shortages that can be expected,and key actions that will be required to balance the equation and safeguard the speed of the transition.With these points in mind,our research explor
4、es the following key findings:Materials are a critical enabler of the net-zero transition.The world has embarked on an ambitious decarbonization journey toward a net-zero emissions economy,which will require fundamental technology shifts across industries at an unprecedented speed.These technologies
5、 often require more physical materials for the same output when compared with their conventional counterparts during the construction phase.For example,battery electric vehicles(BEVs)are typically 15 to 20 percent heavier than comparable internal-combustion engine(ICE)vehicles and will therefore bec
6、ome a key driver for materials demand in the coming decades.Consequently,the extent to which global materials supply chains can keep up with new and accelerating sources of demand will be a critical determinant of global decarbonization rates.Even with the current decarbonization trajectory trending
7、 toward 2.4 Celsius,the supply of many minerals and metals embedded in key lower-carbon technologies will face a shortage by 2030.While some materials,such as nickel,may experience modest shortages(approximately 10 to 20 percent),others,such as dysprosium,which is a magnetic material used in most el
8、ectric motors,could see shortages of up to 70 percent of demand.Unless mitigation actions are put in place,such shortages would likely hinder the global speed of decarbonization because customers would be unable to shift to lower-carbon alternatives.Moreover,these shortages would lead to price spike
9、s and volatility across materials,which in turn would make the technologies in which they are embedded more expensive and further slow adoption rates.We will continue to see a high concentration of mineral and metals supplies in a handful of countries,including,for example,China(rare-earth elements)
10、,the Democratic Republic of the Congo(cobalt),and Indonesia(nickel).Combined with a regulatory landscape that is increasingly focused on regionalizationas seen through the US Inflation Reduction Act and the EU Green Deal Industrial Plan,for examplethese concentrated supplies could affect regional ac
11、cess to materials within the scope of certain agreement areas,even when the global market is balanced.At the same time,such concentration could also offer opportunities to traditional mining countries to develop refining activities domestically.Harmonized actions on supply,demand,innovation,and poli
12、cy will be required to balance the equation and safeguard the speed of the transition.Supply.It is crucial to ensure the timely scale-up of projects that have already been announced,which will require mining to accelerate beyond historical growth rates for many materials while simultaneously doublin
13、g down on exploration to ensure further scale-up of supply beyond 2030.Investments in mining,refining,and smelting will need to increase to approximately$3 trillion to$4 trillion by 2030(about$300 billion to$400 billion per year).1 Labor capacity will need to be increased by 300,000 to 600,000 speci
14、alized mining professionals,and an additional 200 to 500 gigawatts of(ideally low-carbon)energy will need to come online by 2030 to power these assets,equivalent to 5 to 10 percent of estimated solar and wind power capacity by 2030.Finally,the scale-up will require smooth permitting processes,timely
15、 infrastructure deployment,equipment availability,and adequate water resources.Executive summary1 This represents a 50 percent increase compared to the previous decade,in a context where mining investments have been declining in the recent past(approximately$260 billion in 2012 to approximately$150
16、billion in 2019,a decline of about 40 percent).Moreover,capital will need to be redirected toward new materials,with stable investments in iron ore but twice the investments in copper and an eightfold increase in investments in lithium expected.1Materials transition:Implications of the net-zero tran
17、sition on global supply chains Demand.Downstream industries will need to shift demand patterns toward proven technologies that are less materials-intensive or that require different materials for which supply is less constrained.Innovation.Investments in materials innovation and breakthrough technol
18、ogies should be amplified.On the demand side,this might involve exploring material substitution options for long-term-constrained or regionally concentrated materials.On the supply side,investors could consider focusing on enhanced recycling practices for new materials such as rare-earth minerals,as
19、 well as innovative solutions to increase the throughput of existing assets.Policy.New policies may facilitate the scale-up of supply,such as by streamlining permitting procedures for new asset developments.Policies could also enable a demand shift toward alternative technologies by guaranteeing a l
20、evel playing field across different technological options,for example,and safeguarding regional security of supply and industry competitiveness.Stakeholders can increase the likelihood of success by developing strategies that offer optionality and resilience across a broad range of global responses
21、to material shortages.As a first step toward mitigating risk and tapping into the vast opportunities presented by the materials transition,it will be critical for governments and companies alike to maintain or strengthen their understanding of the dynamics of the global materials supply chain and po
22、tential long-term scenarios.For governments,doing so could help shine a light on the security of supply and safeguard the long-term competitiveness of local industries.For companies,it can inform decisive actions that are more likely to position them as industry leaders in the years to come.2Materia
23、ls transition:Implications of the net-zero transition on global supply chainsThe world has embarked on an ambitious journey to reduce greenhouse-gas(GHG)emissions.Currently,72 countries covering 82 percent of global emissions have committed to net-zero emissions,2 several with targets set for as soo
24、n as 2050.McKinseys research from 2022 highlights that the net-zero transition will be defined by six characteristics,including increased exposure to a risk of supply shortages,associated price increases,and market volatility.3 Indeed,as governments and companies gradually shift their attention from
25、 setting bold ambitions to scaling climate technologies,questions are being raised about the effects of the large-scale technology deployment on global physical supply chains,including land-use change,materials,and manufacturing.Materials in particular have emerged as a key topic of debate.This is b
26、ecause lower-carbon technologies are often more materials-intensive than their conventional counterparts during the construction phase and also require a new suite of materials that the world has produced only in limited quantities in the past,notably battery and permanent-magnet materials.This repo
27、rt aims to provide an integrated perspective on how the transition will affect global materials value chains.It identifies any materials shortages that may be expected and the key actions that will be required to safeguard the speed of the transition.This report focuses on a subset of minerals and m
28、etals that are embedded in key low-carbon technologies,while addressing the implications for the broader materials industry such as plastics and building materials.Such integrated perspectives will likely become increasingly important for governments as they reflect on the competitiveness of local e
29、conomies,the security of supply,and trade relationships.Likewise,for companies,upstream market dynamics will increasingly inform strategic decisions ranging from vertical integration to long-term technology choices.The materials transitionThe challenge for the materials industry will be how to captu
30、re this opportunity in a sustainable way while doubling down on operational efficiency to avoid price inflation beyond affordable levels.2 Based on 2019 total global emissions.3 “Six characteristics define the net-zero transition,”McKinsey,January 25,2022.Increased exposure to risks is one of the si
31、x characteristics.The first of the other five is universality,meaning all major energy and land-use systems would need to be transformed and every country and economic sector would be affected.Furthermore,there will be significant spending on physical assets($9.2 trillion annually,up from$3.5 trilli
32、on per year);front-loaded spending(rising to 8.8 percent of GDP from 2026 to 2030 versus slightly less than 6.8 percent today);uneven exposure affecting developing countries and fossil fuelrich regions;and a richness of opportunities,including minimizing further buildup of physical risks and creatin
33、g more-efficient operations from decarbonization,as well as new markets for low-emission goods and services.3Materials transition:Implications of the net-zero transition on global supply chainsThe analyses presented in this report bring together insights from McKinseys Global Energy Perspective on e
34、nergy transition pathways,McKinsey MineSpans on minerals and metals,the McKinsey Center for Future Mobility(MCFM)on transport electrification,and McKinsey Battery Insights on battery technology adoption.An industry in flux:Growth in materialsThe materials industry4 has been an important driver of th
35、e global economy over the past two decades,increasing its share of global GDP from about 4 percent in 2000 to 7 percent in 2022(Exhibit 1).That said,the industrys growth has not been linear:coming out of a“super cycle”from 2000 to the 200809 financial crisis,mainly driven by Chinas industrialization
36、,industry revenue flattened until 2020 as global economic growth slowed and prices for most materials either stabilized or gradually declined.The next two years were again marked by steep increases in both revenues and profitability,primarily spurred by supply chain disruptions and increased energy
37、prices in response to the COVID-19 pandemic and the invasion of Ukraine.Since then,prices for most materials have come down,but industry revenue as well as profitability remain well above historical levels.Projections for the materials industry show that revenue growth could outpace GDP growth in th
38、e coming decade,propelled partially by Exhibit 1Revenues of the materials industry,nominal,$billion1Excluding coal and uranium.Source:Eurostat;ITC Trade Map;World Bank;McKinsey MineSpans;McKinsey analysisincreased about fve times over.McKinsey&CompanyShare of global GDP,%01,0002,0003,0004,0005,0006,
39、0002000200520022CAGR,200022,%Materials and metalsBuilding materialsPlastics7510456657+5 4 Including metals and minerals,plastic resins and synthetic rubber,wood,cement,and glass.4Materials transition:Implications of the net-zero transition on global supply chainsgrowing demand but also by
40、 the inflation-driven steepening of global mining and metals cost curves,ore-grade deterioration,5 and labor shortages,among other factors.The challenge for the materials industry will be how to capture this opportunity in a sustainable way while doubling down on operational efficiency to avoid pric
41、e inflation beyond affordable levels(see sidebar“The materials trilemma”).This report focuses specifically on availability of a subset of minerals and metals,with the understanding that sustainability and affordability can and likely will further shape technological pathways.Materials demand and the
42、 role of the net-zero transitionMaterials demand over the next few decades is expected to be driven by three factors:a growing global population,which is expected to increase from 7.8 billion people in 2020 to 9.6 billion in 2050,with the largest growth in Sub-Saharan Africa(more than 1.0 billion)an
43、d India(more than 0.3 billion)continued development of the middle class,6 which accounts for about 3.2 billion people today and is expected to grow to 5.0 billion to The materials trilemmaThe materials trilemma refers to the industrys need in the coming decades to balance priorities related to avail
44、ability,affordability,and sustainability.Availability.The industry will need to meet growing demand from continued population growth,middle-class development,andincreasinglythe deployment of lower-carbon technologies in support of the net-zero transition.At the same time,the industry will need to en
45、sure security of supply in a context of a high concentration of mining and refining supply in select countries and a changing regulatory landscape that is increasingly focused on regionalization,recently exemplified through policies or legislative proposals such as the Inflation Reduction Act in the
46、 United States and the Critical Raw Materials Act in the European Union.1 Affordability.The industry will also need to maintain competitive prices to ensure affordability of materials and the products and applications that are built from those materials.Next to the parameters that can be directly in
47、fluenced by the industrysuch as operational efficiencyregulatory incentives,including taxes,subsidies,or“hard”targets on technology shifts,can affect the relative competitiveness of technologies and,consequently,the affordability threshold across materials.Sustainability.The industry should comply w
48、ith or exceed the environmental,social,and governance standards and requirements set out by governments,customers,and industry associations alike.Although the industry will need to focus on reducing its emissions footprint,which currently accounts for about 20 percent of global greenhouse-gas(GHG)em
49、issions(approximately ten metric gigatons of CO2 equivalent2),sustainability extends well beyond GHG emissions to include water consumption,land use and biodiversity,and working and wage conditions,among others.Earlier research by the McKinsey Sustainable Materials Hub3 has shown that industry leade
50、rship in sustainability can be a significant source of commercial value.For example,players offering lower-carbon steel products in certain markets can capture 20 to 30 percent price premiums,compared with average prices.1 For more,see“Inflation Reduction Act of 2022,”US Internal Revenue Service(IRS
51、),updated June 1,2023;and“Critical raw materials:Ensuring secure and sustainable supply chains for EUs green and digital future,”European Commission,March 16,2023.2 Based on emissions from 2021,primarily driven by iron and steel(about 7 percent),cement(about 5 percent),and plastics(about 3 percent).
52、3 “Sustainable Materials Hub,”McKinsey,accessed June 1,2023.5 For example,global primary copper mines average head grade reduced from approximately 1.8 percent in 1970 to 0.7 percent in 2021,and global primary sulfide mines average head grade reduced from approximately 3.3 percent in 1970 to 0.4 per
53、cent in 2019.6 The middle class is defined as share of the global population with an expenditure range of$10 to$100 per day at 2011 purchasing-power parity.5Materials transition:Implications of the net-zero transition on global supply chains6.0 billion by 2050,with the largest growth in China and In
54、dia the net-zero transition and the associated deployment of lower-carbon technologies,including renewable power,energy storage,and hydrogen,among others(Exhibit 2)With these factors in mind,the net-zero transition could directly propel materials growth in two ways.First,lower-carbon technologies ar
55、e often more materials-intensive than their conventional counterparts at the construction phase.For example,an offshore-wind turbine is about six times more materials-intensive than a gas-based installation on a megawatt basis,while battery electric vehicles(BEVs)are 15 to 20 percent heavier than in
56、ternal-combustion engine(ICE)vehicles on average.Second,lower-carbon technologies require a new suite of materials that have been produced in only limited quantities in the past,such as lithium,a critical battery material,or rare-earth elements such as dysprosium and neodymium,which are used in perm
57、anent magnets.The transition could also indirectly drive demand for materials used in processing raw materialsfor example,sulfuric acid,which is used in processing of nickel and lithium,among othersExhibit 2Global greenhouse-gas abatement per technology compared to business-as-usual baseline,2050,bi
58、llion metric tons CO2e per annumNote:Figures may not sum to 100%,because of rounding.1Battery energy storage system and long-duration energy storage system.2Carbon capture,utilization,and storage.3Includes operational efciency,agriculture,and methane faring.Source:McKinsey Global Energy Perspective
59、2022;McKinsey Sustainability Insightsabatement needed for the net-zero transition by 2050.McKinsey&CompanyClean electrons and power storageClean molecules and industrial electrifcationNature-based technologiesCarbon removalsAbatementcontribution,%50252015Business as usual emissions in 2050Renewables
60、BESS&LDESNuclearElectrifcationHydrogenCCUSSustainable fuelsNatural climate solutionsCircular technologyAlternative proteinsCarbon removalsOther solutions6Materials transition:Implications of the net-zero transition on global supply chainsor in manufacturing the technology itself,such as high-purity
61、quartz,which is used as a crucible in the manufacturing of solar panels.The magnitude at which the net-zero transition affects global materials value chains will depend on the speed of decarbonization as well as the underlying design choices made for each technology(batteries,electric motors,electro
62、lyzers,and so on).For this report,we considered three net-zero scenarios that are also used in our annual Global Energy Perspective(Exhibit 3).7 We recognize that these scenarios might be decelerated for various reasons and that the world is currently not on a path to achieve existing commitments.At
63、 the same time,we want to illustrate how the materials supplydemand balance could be affected by different decarbonization pathways,shedding light on the additional complication that materials will pose to the transition.Our analysis shows that future growth rates for many materials are expected to
64、outpace historical growth rates across all demand scenarios,especially in absolute terms(Exhibit 4).8 Future growth rates for many materials are expected to outpace historical growth rates across all demand scenarios,especially in absolute terms.7 For more on these scenarios,see Global Energy Perspe
65、ctive 2022,McKinsey,April 2022.8 Growth in materials is primarily driven by the growth of large-volume applications,including BEVs,wind turbines,and solar panels.For example,in 2030,more than 50 percent of rare-earth elements,55 percent of cobalt,and 36 percent of nickel will be consumed by BEVs and
66、 the associated charging infrastructure.7Materials transition:Implications of the net-zero transition on global supply chainsExhibit 3Demand scenarios and material intensity levels for new technologies,GW/M units 1Scenario where net-zero commitments are achieved by leading countries through purposef
67、ul policies;followers transition at slower pace.2Scenario where transition is further accelerated,driven by country-specifc commitments,though fnancial and technological restraints remain.3Scenario where current trajec-tory of renewables(cost decline)continues but currently active policies remain in
68、sufcient to close remaining gap to targets.4Solar photovoltaics.5Battery electric vehicle.6Gigawatts;energy capacity additions.7Gigawatts;energy capacity additions based on hydrogen capacity additions.8Minerals and metals only;renewables compared to coal and gas in kilograms(kg)per MW,and BEV compar
69、ed to an internal-combustion engine in kg per unit.Source:McKinsey MineSpansmaterials than conventional technologies.McKinsey&CompanyKey metals and minerals contained(not exhaustive)LithiumCobaltManganeseGraphiteNeodymium and praseodymiumIridiumTinCopperBauxiteDysprosium and terbiumNickelMaterial in
70、tensity vs conventional technology1.46.32.41.2Solar PVOfshore windOnshore windPassenger BEVElectrolyzersCurrent demand,2020Current Trajectory scenario,2030Further Acceleration scenario,2030Achieved Commitments scenario,2030GW GW GW Million(M)unitsGW 1611596238Materials transition:Implications of the
71、 net-zero transition on global supply chainsExhibit 41Material demand increase(indexed to 2010=100)Source:McKinsey Global Materials Insights;McKinsey MineSpans The future growth rate for many materials is expected to signifcantly increase by 2030.McKinsey&CompanyLithiumDysprosium and terbiumNeodymiu
72、m and praseodymiumCobaltNickelAluminumCopperTinManganeseSteel20030200306662003020030202322Current TrajectoryFurther AccelerationAchieved Commitments201022202230 under Further Acceleration scenarioCAGR,%:XX200222022202220222
73、0222022202220222022The growth dynamics vary significantly across materials,which can be attributed to the proportion of materials demand dedicated to lower-carbon technologies(Exhibit 5).For instance,lithium,predominantly used in the batteries of BEVs,is projected to account for more than 80 percent
74、 of total lithium demand in 2030.As a result,its growth over the next decade will be entirely linked to the rate of transport electrification.By contrast,manganese demand will be primarily driven by the demand for stainless steel,which in turn is driven by the consumer goods and construction industr
75、y(accounting for 70 percent of demand in 2030).Thus,manganese is expected to see a more modest growth rate of approximately 2 percent per year until 2030.Supplydemand balanceIn theory,the increase in demand could be met by scaling supply because none of the materials required in the production of lo
76、wer-carbon technologies is scarce.In fact,resources and 9Materials transition:Implications of the net-zero transition on global supply chainsExhibit 5Share of materials demand in 2030 driven by the net-zero transition,%1Net-zero transition share includes demand from renewable power,energy storage sy
77、stems,electric vehicles,and copper.Includes demand from added trans-mission lines in developed countries.Tin includes demand from semiconductors.2Rare-earth elements.Source:McKinsey Global Materials Insights;McKinsey MineSpansdrastically across materials.McKinsey&CompanyLithiumREEsGraphiteCobaltIrid
78、iumNickel CopperAluminum ManganeseSteel8074909292826108Low-carbon technologiesOtherreserves for several metals and materials are at their highest levels since 2000(Exhibit 6).However,because it typically takes five to 15 yearsdepending on the material,project characteristics,an
79、d regulatory environmentto develop new deposits from exploration to mining operations,temporary materials shortages could occur if demand growth outpaces initial industry expectations.For this report,we developed two supply scenarios based on our research on the maturity and likelihood of individual
80、 projects for each material.The research is anchored in our MineSpans database,which contains more than 10,000 operating mines and mining projects across more than 130 countries9:Base-case scenario.This includes all operating mines(corrected for depletion where relevant)and projects currently under
81、construction,as well as projects for which a feasibility study has been conducted and financing secured and projects for which a feasibility study is currently being conducted.High-case scenario.This includes projects for which a prefeasibility study has been initiated.Projects that have been announ
82、ced but so far have not initiated any prefeasibility study are not included in the forecasts.9 Recycled materials have been consistently included in both supply scenarios,based on assumptions on average end-product lifetimes and collection and recovery rates.Conversely,potential changes in productio
83、n quota,such as those on rare-earth elements in China,have not been considered in any of the scenarios.10Materials transition:Implications of the net-zero transition on global supply chainsExhibit 6Materials resources and reserves,million metric tons 1Resources are a concentration of naturally occur
84、ring solid,liquid,or gaseous material in or on the Earths crust,while reserves are what could be economically extracted or produced at the time of determination.2Most recent projects have been high-pressure acid leach(HPALs).3Resources of 1%Ni for 200020 and 0.5%Ni for 202123.Source:United States Ge
85、ological Survey;McKinsey Global Material Insights;McKinsey MineSpansall-time high.McKinsey&CompanyLithiumCobaltNickel Copper2000200520040608020002005200200520003002000200520,0002,0003,0004,0005,000ReservesResources11Materials transiti
86、on:Implications of the net-zero transition on global supply chainsTo put this into perspective,there are approximately 500 cobalt,copper,lithium,and nickel mines operating today.The base-case scenario would require the addition of 196 mines(an increase of approximately 40 percent)by 2030,while the h
87、igh-case scenario would require the addition of 382 mines(an increase of approximately 80 percent).Both scenarios carry inherent uncertainty,given the conditions that need to be fulfilled for a project to come online as planned,including timely delivery of permits(which notably requires a compliant
88、environmental impact assessment for most jurisdictions),availability of skilled labor,closing of project financing,timely delivery of equipment,availability of freshwater(notably in the Lithium Triangle in South America)and processing materials(such as sulfur),timely deployment of infrastructure upg
89、rades,and a stable regulatory framework.That said,an assessment of supplydemand balances shows that most materials within the scope of this report would face a shortage by 2030 across all scenarios(Exhibit 7):Lithium,cobalt,nickel,manganese,and graphite(batteries).Most battery materials,especially l
90、ithium and cobalt,would be constrained despite ongoing shifts in battery chemistry,including the reduction in cobalt intensity and the partial shift from Exhibit 7Supplydemand balance,by main end use,%1Including recycled materials.Source:McKinsey Global Materials Insights;McKinsey MineSpans global s
91、upplydemand imbalance by 2030 or sooner.McKinsey&CompanyBatteryMagnetsTransmission and distributionElectrolyzersSemiconductorsProcess materialSulfuric acidTinIridiumMaterialCopperBauxiteNeodymium and praseodymium Dysprosium and terbiumGraphiteManganeseNickelCobaltLithiumSupply demand(0)Quasi balance
92、d(0 to 10)Imbalance(11 to 20)Moderate imbalance(21 to 50)Severe imbalance(50)Current trajectoryFurther accelerationAchieved commitmentsBase caseHigh caseBase caseHigh caseBase caseHigh case12Materials transition:Implications of the net-zero transition on global supply chainsnickel-manganese-cobalt(N
93、MC)toward lithium-iron-phosphate(LFP)batteries.Dysprosium and terbium,and neodymium and praseodymium(permanent magnets).All magnet materials are expected to fall short,with rare-earth elements such as dysprosium and terbium being the most constrained.This would limit the production of permanent magn
94、ets used in the electric motors of most BEVs and the drivetrains of wind turbines(as approximately 20 percent of onshore and 70 of offshore wind turbines are currently using permanent magnet drivetrains).Copper(electric wiring).Copper is also expected to fall short in most scenarios,which would affe
95、ct the build-out speed of transmission and distribution lines that connect renewable-power sources to the grid and consequently the risk profile of renewable-energy projects.Iridium(hydrogen electrolyzers).Iridium is part of the platinum group metals and is one of the scarcest materials in the world
96、,with a global production of approximately 7,900 metric tons in 2021.10 It is expected to see a growing shortage as the demand for electrolyzersespecially proton exchange membranesused in the production of low-carbon hydrogen likely increases exponentially in the coming years.Tin(semiconductors).App
97、roximately 50 percent of tin demand is driven by solder in semiconductors for electronic devices,in which it is used to attach components to printed circuit boards or other substrates.Because tin is expected to see a modest shortage,semiconductor supply chains could become constrained,which would di
98、rectly affect the supply chains of most lower-carbon technologies.11In addition to the materials physically embedded in lower-carbon technologies,supply chain disruptions for materials required in the processing of these materials could also affect the transition.For instance,sulfur,which is used in
99、 refining nickel,12 lithium,manganese,and copper,is expected to fall short because it is produced primarily from the desulphurization of oil and natural gas.In fact,sulfur is already in short supply today(by less than 5 percent).This gap is being bridged by the consumption of oil sands from sulfur p
100、yramids in Kazakhstan and Alberta,Canadaa temporary measure that is expected to last only until the end of 2024,after which stocks will be depleted.Based on current supply and technology outlooks,the materials shortages and associated inability to shift to lower-carbon technologies would lead to the
101、 release of an additional 400 to 600 metric megatons of CO-equivalent emissions in 2030 alone.In the scenarios considered in this report,shortages of dysprosium and terbium would be the primary causes of the increase in GHG emissions,which shows that bottlenecks in just one or a few materials can de
102、lay the deployment of lower-carbon technologies across multiple industries(in this case,electric vehicles EVs and wind turbines13)and thus slow the transition to net-zero emissions.Supply concentrationMinerals and metals have historically been a global industry,with materials flowing from mining min
103、eral-rich countries across the world to a few countries for refining(notably China)and final consumption and processing in industrialized countries.The mining and refining of the materials within the scope of this report will likely continue to be concentrated in select countries.Some countries are
104、expected to retain their market 10 As reported by United States Geological Survey(USGS).11 As an example,see the impact of semiconductor shortages on the automotive industry in 2021:Ondrej Burkacky,Johannes Deichmann,Philipp Pfingstag,and Julia Werra,“Semiconductor shortage:How the automotive indust
105、ry can succeed,”McKinsey,June 10,2022.12 In Indonesia,an increased demand for sulfur and sulfuric acid is expected for nickel laterite high-pressure acid leach(HPAL)processing,which is more intensive in sulfuric acid compared with nickel sulfide and nickel laterite leaching used in other regions.13
106、Assuming the inability to meet demand for EVs(delta of 150 million to 250 million units)and for wind turbines(delta of 150 to 200 gigawatts).13Materials transition:Implications of the net-zero transition on global supply chainsshares;for example,the Democratic Republic of the Congo will likely conti
107、nue to provide approximately 75 percent of the global cobalt mining supply.14 Other countries are expected to further strengthen their position.Indonesia is increasing its market share in nickel production from 33 percent in 2021 to 58 percent by 2030,while the Philippines and Russia,the second-and
108、third-largest producers are projected to represent only 7 and 6 percent of the market,respectively.Finally,some materials are likely to see a more diversified supply by 2030.For instance,Australias share of global lithium production will likely decrease from approximately 43 percent in 2021 to 24 pe
109、rcent in 2030,in favor of Argentina,among others,which could see its market share increase from around 6 percent to 19 percent over the same period.On the refining side,China is expected to retain its position as the global center of activity,processing more than 40 percent of all materials in scope
110、,15 although for select materials such as lithium,Chinas market share is expected to decline from more than 90 percent in 2021 to about 60 to 70 percent by 2030,based on current project announcements.Overall,this high level of concentration combined with a changing regulatory landscape that is incre
111、asingly focused on regionalizationfor example,the US Inflation Reduction Act and EU Green Deal Industrial Plancould affect the security of supply of materials and long-term industry competitiveness in individual regions even when the global market is balanced.At the same time,the high level of conce
112、ntration could also offer countries that have traditionally been mineral extractors the opportunity to invest into domestic value-adding activities,including refining and processing,to capture the full value of their natural resources.16 Several countries have already taken steps in this direction.F
113、or instance,the Democratic Republic of the Congo and Zambia announced the development of battery production earlier this year.17 In such a context,materials-consuming countries would need to rethink their agreements with producers to ensure security of their supply chains.Four key actions to bridge
114、the gapTo address the materials imbalance and uphold the momentum of the net-zero transition,concrete actions can be taken in four areas:supply,demand,innovation,and policy.Supply.It is crucial to ensure the timely scale-up of needed supplies,which will require mining to accelerate beyond historical
115、 growth rates for many materials.Investments in mining,refining,and smelting will need to increase by approximately$3 trillion to$4 trillion by 2030(about$300 billion to$400 billion per year),including capital expenditures for exploration and new and ongoing projects.18 Labor capacity will also need
116、 to be increased by 300,000 to 600,000 specialized mining professionals,which could be particularly challenging given the recent decline in the number of mining engineering graduates.Energy supply is another consideration:it is estimated that an additional 200 to 500 gigawatts of(ideally green)energ
117、y will need come online by 2030,equivalent to 5 to 10 percent of estimated solar and wind power capacity by 2030.Finally,all this will require smooth permitting processes,timely infrastructure deployment,equipment availability,and adequate water resources.Demand.A significant shift in demand pattern
118、s toward proven technologies in the coming decade could require less material per product or different materials for which supply is less constrained.14 All numbers in this section are based on a high-case supply scenario.15 Value weighted based on 2021 price levels.16 “Reimagining economic growth i
119、n Africa:Turning diversity into opportunity,”McKinsey Global Institute,June 2023.17 “DRC and Zambia to establish SEZs for electric vehicle production,”African Business,April 11,2023.18 This represents a 50 percent increase compared to the previous decade,in a context where mining investments have be
120、en declining in the recent past(approximately$260 billion in 2012 to approximately$150 billion in 2019,a decline of about 40 percent).Moreover,capital will need to be redirected toward new materials,with stable investments in iron ore but twice the investments in copper and an eightfold increase in
121、investments in lithium expected.14Materials transition:Implications of the net-zero transition on global supply chains Innovation.Investments in materials innovation and breakthrough technologies should be amplified.On the demand side,this might involve exploring material substitution options for lo
122、ng-term-constrained or regionally concentrated materials.On the supply side,investors could consider focusing on enhanced recycling practices for new materials such as rare-earth minerals,as well as innovative solutions to increase the throughput of existing assets.Policy.New policies may facilitate
123、 the scale-up of supply via streamlining permitting procedures,among other options.Policies could also enable a demand shift toward alternative technologies by guaranteeing a level playing field across different technological options,for example,and safeguard regional security of supply and industry
124、 competitiveness.These points in mind,each of these four imperatives will require collaboration among actors within various materials value chains to ensure smooth flows from producers to consumers.Shifting demand patterns Several actions can be taken on the demand side,including a reduction in the
125、materials intensity of preferred technologies to fundamental technology shifts toward either existing technologies,which consume different materials for which supply is less constrained,or breakthrough technologies,which could be accelerated through increased investments in innovation.Because the in
126、dustry has repeatedly demonstrated its ability to respond to price volatility,it is reasonable to anticipate ongoing To address the materials imbalance and uphold the momentum of the net-zero transition,concrete actions can be taken in four areas:supply,demand,innovation,and policy.15Materials trans
127、ition:Implications of the net-zero transition on global supply chainsadaptability in the face of future challenges(see sidebar“Industry responses to supply challenges”).Although there are several ways to close the gap through shifts in demand patterns across industries,there is no guarantee that the
128、se shifts will follow a trajectory of the lowest system cost,which depends on the further development of the regulatory landscape and the speed of innovation in the coming years.In our illustrative scenario,we lay out one possible framework(out of many)that would allow a supplydemand balance for all
129、 materials by 2030 while retaining the desired speed of decarbonization if applied as early as possible.In our illustrative scenario,changes in demand patterns would be required across five key areas to balance the equation by 2030(Exhibit 8).Exhibit 8 Demand of transition technologies and enablers
130、in a potential technology trajectory,2020 vs 2030,%1For both EVs and stationary storage(BESS).2Nickel manganese cobalt.3Olivine LiMnxFe1xPO4 is a cathode material for high-performance lithium-ion batter-ies.4Lithium manganese nickel oxide.5Lithium cobalt oxide and lithium ion manganese oxide.6Perman
131、ent-magnet synchronous motor.7Squirrel cage induction motor and electrically excited motor.8As there is zero hydrogen capacity today,announced projects for 2023 are shown.9Semiconductors are used in consum-er electronics,appliances,and industrial machinery.Across fve key areas,the largest changes wi
132、ll likely be required in battery chemistry and the mix of electric-vehicle motors.McKinsey&CompanyBattery chemistry optimization Shift from low-nickel to high-nickel NMC and L(M)FP/LMNO batteries Electric-vehicle(EV)motor type mix changesShift from rare-earth element(REE)to non-REE motorsCopper(Cu)s
133、ubstitution by aluminium(Al)Shift from Cu to Al in selected components of electrical applicationsH2 electrolyzer technology mix changesShift from proton exchange membrane(PEM)electrolyzers to othersSemiconductor packaging type changes Shift from fip chip soldering to other packaging typesHigh-case s
134、upply scenario20202030Low-Ni NMC2High-Ni NMC2L(M)FP3/LMNO4LCO/LMO5Na-Ion20202030Rare earth e-motorRare-earth freee-motor20202030Aluminum wiringCopper wiring20232030PEMOther technologies20232030Flip chip(soldering)Other packaging16Materials transition:Implications of the net-zero transition on global
135、 supply chainsIndustry responses to supply challengesExhibit Selected examplesNote:Figures may not sum to 100%,because of rounding.1Nickel manganese cobalt.2Lithium iron phosphate.Source:World Bank;McKinsey Battery InsightsHistorically,the materials industry has been able to respond quickly to suppl
136、y challenges and price volatility.McKinsey&CompanyMetal intensity reductionSplit between NMC battery typesExpected cobalt(Co)supply shortages initiated a shift to NMC batteries with a higher nickel but a lower cobalt intensity.Material substitutionStainless steel grade distributionHigh nickel(Ni)pri
137、ces caused a shift from 300-to 200-and 400-series stainless steel.Technology substitutionEvolution of cathode type splitHigh Ni prices triggered a shift from NMC batteries(high in Ni)to LFP batteries(lower in Ni).Cobalt price,$/kgNickel price,$/kg20639431710034NMC532(0.30 Co kg/KWh)NMC622
138、(0.21 Co kg/KWh)NMC811(0.09 Co kg/KWh)NMC111(0.39 Co kg/KWh)200020072023715754Other200-series(1.06.0%Ni)400-series(0.20.75%Ni)300-series(6.022.0%Ni)4:17 p.p.reduction in 300 series201025:19 p.p.shift to LFP9320253323225OtherNMC1(0.55 Ni kg/KWh)LFP2(0.05 Ni
139、 kg/KWh)1326201020:100%shift to lower intensity NMCNickel price,$/kgHistorically,the industry has been able to respond quickly to supply challenges and price volatility in three ways(exhibit).Metal intensity reduction.In the expectation of cobalt supply shortages,there was a shift to nickel-manganes
140、e-cobalt(NMC)batteries with increasing nickel content and a lower cobalt intensity,leading to a reduction in cobalt consumption per battery unit from 2010 to 2020.Materials substitution.High nickel prices caused a shift from 300-to 200-and 400-series stainless steel,with a reduction of 17 percentage
141、 points in 300-series stainless steel from 2000 to 2015.Technology substitution.High nickel prices triggered a shift from NMC batteries,which are high in nickel content,to lithium-iron-phosphate(LFP)batteries,which do not require any nickel,effectively raising the share of LFP in global battery dema
142、nd from 16 to 24 percent from 2018 to 2022.17Materials transition:Implications of the net-zero transition on global supply chains1.EV and stationary batteries(affecting battery materials such as lithium,cobalt,nickel,and manganese).Battery chemistries have seen drastic changes in recent years,includ
143、ing a reduction in cobalt intensity and the adoption of LFP batteries in BEVs given their lower cost compared to NMC batteries(albeit at a lower energy density and recyclability).Shifting toward NMC batteries with a high nickel content could alleviate the pressure on lithium supply chains;the lithiu
144、m intensity for these batteries is lower compared to low-nickel NMC batteries.A partial shift toward sodium-ion batteries,a nascent technology with initial commercial-scale production announced for 2024,could further alleviate pressure.Because these batteries have a lower energy density,it is expect
145、ed that stationary storage applications would shift first because there are fewer constraints on physical volume.2.EV powertrain system(affecting magnet materials dysprosium and terbium,and neodymium and praseodymium).Most BEVs have a permanent-magnet synchronous motor that requires approximately 1
146、kilogram of rare-earth materials for every 100 kilowatts of power output.However,a few automotive OEMs have launched vehicles running on either squirrel cage induction motors or electrically excited motors that do not require any rare-earth materials.An accelerated shift toward rare-earth-free elect
147、ric motors,as recently alluded to by Tesla in its Master Plan,19 could resolve the gap for all rare-earth elements while also diversifying supply chains in a context in which more than 80 percent of permanent magnets are currently produced in China.3.Hydrogen electrolyzers(affecting iridium).Given t
148、he small size of the low-carbon hydrogen market,there is no clear trend yet on preferred electrolyzer technologies.Furthermore,only 12 percent of currently announced hydrogen projects have disclosed their preferred electrolyzer technology.As a result,there could still be flexibility to resolve any p
149、otential shortage in iridium by shifting from polymer electrolyte membrane(PEM)technology toward alkaline-water electrolysis or other nascent technologies,such as solid-oxide electrolyzer cells.4.Electric wiring(affecting copper and aluminum):Copper is often the material of choice in electrical wiri
150、ng given its high electrical conductivity.However,there are certain applications for which other materials,notably aluminum,have a better cost performance.For example,most overhead transmission lines are made from aluminum instead of copper because its lower weight allows a larger distance between p
151、ylons and,consequently,a lower systems cost.Therefore,its possible to rebalance the copper market by further shifting from copper to aluminum in electric wiring as the difference between copper and aluminum prices increases.20 5.Semiconductor packaging(affecting tin).There are several microelectroni
152、cs packaging methods,including flip chip and wire bonding,and advanced methods such as 2.5-D and 3-D stacking.Because tin intensity is higher in flip chip packaging,which represented about 35 percent of the integrated-circuit(IC)packaging market in 2020,a shift toward wire bonding or 19 Master Plan
153、Part 3:Sustainable energy for all of Earth,Tesla,April 5,2023.20 Historically,there has been a strong correlation between the spread and copper substitution rate(as reported by the International Copper Association).18Materials transition:Implications of the net-zero transition on global supply chain
154、sadvanced packaging methods(which use less tin solder)could resolve the market imbalance for tin.Sulfur shortages may still be resolved by increasing supply,although this would require a partial shift from sweet to sour oil or natural-gas production.Alternatively,the gap could be resolved on the dem
155、and side through,for example,substituting hydrochloric acid or nitrophosphate for sulfuric acid in fertilizer production or shifting from high-pressure acid leaching to rotary kiln electric furnaces in nickel processing.Several of these technology shifts would require a higher investment versus a bu
156、siness-as-usual scenario and therefore may not be the desired path for industrials,given the risk of losing competitiveness.At the same time,delaying the shift to these alternative technologies could lead to short-term and midterm price spikes for current technologies,primarily driven by rising mate
157、rials prices as the market becomes tighter,which could eventually lead to an even costlier transition.Therefore,companies will need to reflect on the optimal timing of the shift from an economic perspective.They will also need to consider the relative emissions intensity of alternative technologies
158、and the cost of decarbonization.If not,shifting may mitigate exposure to commodity price volatility but increase exposure to carbon taxes.19Materials transition:Implications of the net-zero transition on global supply chainsPatricia Bingoto is a senior expert in McKinseys Zurich office;Michel Foucar
159、t is an associate partner in the Brussels office;Maria Gusakova is a partner in the Houston office,where Thomas Hundertmark is a senior partner;and Michel Van Hoey is a senior partner in the Luxembourg office.The authors wish to thank Elaine Almeida,Marcelo Azevedo,Hana Dadic,Max Derie,Karel Eloot,K
160、arilyn Farmer,Nicolas Goffaux,Ilana Kochetkova,Gregory Kudar,Laura Latzel,Sigurd Mareels,Amlie Nicolay,Nathan Reinders,Alina Saranova,Bram Smeets,Ccilia Smissaert,Sven Smit,Michelle Stitz,Humayun Tai,Iris Tavernier,Frederik Wullepit,Corinne Yabroudi,and Inese Zepa for their contributions to this rep
161、ort.Copyright 2023 McKinsey&Company.All rights reserved.ConclusionAs the world accelerates the deployment of climate technologies in support of the net-zero transition,there is a risk that materials supply might not scale at the required speed.Our research has shown that energy and materials are str
162、ongly interconnected and that the world will also have to go through a materials transition to deliver on its net-zero ambitions.While several uncertainties remain about how the materials transition will play outsuch as the speed of decarbonization,development of trade policies,speed of innovation a
163、nd time to market for breakthrough technologies,and permitting timelines for new projects,among othersgovernments and companies can plan strategic actions that are resilient across a broad range of outcomes.As a first step toward mitigating risks and tapping into the vast opportunities presented by
164、the materials transition,it is critical for governments and companies to maintain or strengthen their understanding of changing global materials supply chain dynamics with a long-term perspective.For governments,doing so could help shine a light on security of supply and safeguarding long-term compe
165、titiveness of local industries.And similar to the actions and results of frontrunners in the energy transition,companies can gain insight on decisive actions that are more likely to position them as industry leaders in the years to come.20Materials transition:Implications of the net-zero transition
166、on global supply chainsApril 2023Designed by LeffCover image:Maskot/Getty ImagesCopyright McKinsey&CompanyMcKCONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey&Company is strictly prohibited.July 2023Cover image:Yaorusheng/Getty ImagesDesigned by LeffCopyright 2023 McKinsey&Company.All rights reserved.www.McK McKinsey McKinsey