All Insights

Currently reading

Green energy transition to propel industrial metals demand

Investment Insights

8 min read

Green energy transition to propel industrial metals demand

The transition to clean energy technologies will play a crucial role in limiting the effects of climate change. In the coming decades, the demand for industrial metals will be boosted by clean energy policies, including the development of electricity grids and of electric vehicles and battery storage industries. In this Macro Flash Note, GianLuigi Mandruzzato looks at the outlook for the main industrial metals and their prices.

GianLuigi Mandruzzato
GianLuigi Mandruzzato

The International Energy Agency (IEA) recently analysed the impact on the demand for industrial metals of the transition to clean energy policies.1 The technologies considered are:

  • Low-carbon power generation: solar, wind, other renewables and nuclear power;
  • Electricity networks;
  • Electric vehicles and battery storage;
  • Hydrogen, including electrolysers and fuel cells.

The IEA examined two alternative scenarios. The first, the Stated Energy Policies Scenario (STEPS), estimates the effects on industrial metals demand resulting from policies already approved or announced by governments. The second, the Sustainable Development Scenario (SDS), considers the impact of the policies needed to achieve the three energy-related Sustainable Development Goals (SDG) of the United Nations:

  • to achieve universal access to energy (SDG 7);
  • to tackle climate change (SDG 13);
  • to reduce the severe health impacts of air pollution (part of SDG 3).2

​​​​​​​The IEA estimates that over the next 20 years, total demand for industrial metals related to clean energy production, storage and distribution will double in the STEPS and quadruple in the SDS.3 This will be driven mainly by the development of distribution networks and of the electric car and battery storage industries, followed by solar and wind power generation, while nuclear and other clean energy technologies will have a more limited impact. Copper, aluminium, nickel and zinc will satisfy more than 80% of the anticipated total industrial metals demand generated by the coming energy transition. 

Table 1a shows the size of the demand impact for each of the four metals relative to 2020 demand in the two scenarios.4 For the SDS,

Table 1b shows the shares of demand growth between 2020 and 2040 for the four metals by type of clean energy technology and highlights their complementarity in the development of clean energy technologies. 

Table 1a. Clean energy related demand of industrial metals  (2020=100)

Source: IEA and EFGAM calculations

Table 1b. SDS - Share of demand growth due to: 

Source: IEA and EFGAM calculations

To put these numbers in context, Chart 1 shows for each of the four metals the ratio between the demand growth of the next 20 years to that registered in the last 10 years.

Chart 1. Green demand growth for industrial metals

(2020-40 change as % of 2010-20 total change)

Source: IEA, World Bank and EFGAM calculations.

Copper is the most versatile industrial metal and will see a significant increase in demand from the development of electricity grids, the electric car industry, and of solar and wind power generation technologies. Relative to 2020, its demand will increase between 1.7x in the STEPS and 2.7x in the SDS. In the latter case, this would be equivalent to 1.75x the total increase in copper consumption over the last 10 years.

Aluminium demand growth will result only from the development of electricity networks, where it is used as an alternative to copper. According to the IEA, if the price of copper were to rise too much, aluminium would become a competitive substitute capable of absorbing one third of the grid expansion related demand for copper. In this case, the growth rates of the two most used industrial metals would be similar in both scenarios. In the base case, though, aluminium demand growth is lower than that of the other main industrial metals.

Nickel demand will be driven primarily by the electric car and battery storage industries, although nuclear and other technologies will also be an important source of demand. Relative to 2020 levels of consumption related to clean energy technologies, nickel will see the largest increase with demand expected to grow 6.5x over the next 20 years in the STEPS and almost 20x in the SDS (see Table 1a). In the latter scenario, the growth of nickel demand due to the energy transition over the next 20 years would be 3.5x the increase seen between 2010 and 2020.

Finally, zinc demand growth is mainly related to the deployment of solar and wind power technologies, with nuclear power and other technologies also contributing a little. Its demand due to clean energy technologies would increase between 1.8x and 2.6x, and, in the SDS, it would double when compared to the last 10 years of growth.

Given the expected strong increase in demand, industrial metal prices have been rising strongly of late (see Chart 2a). The historical price trends also show two interesting facts. The first is that despite the recent performance, industrial metals prices remain below the highs reached before the Global Financial Crisis. The second is the tendency of prices to move in sync. This is confirmed by a simple statistical analysis showing that since 1994 the four-year correlation over non-overlapping periods in the year-on-year changes of industrial metals prices was very high (see Chart 2b). 

Chart 2a. Industrial metal prices (31.12.2007=100)

Source: Refinitiv and EFGAM calculations.

Chart 2b. 4-year price changes correlation to copper

Chart 2b.png
Source: Refinitiv and EFGAM calculations.

In conclusion, the transition to clean energy technologies necessary to achieve the Sustainable Development Goals set by the United Nations, will be an important structural trend over coming decades. The development of clean energy technologies, including the strengthening of energy distribution networks, the electric car industry and large-scale production of energy from renewable sources, will be accompanied by a strong increase in demand for industrial metals. Copper is often seen as the main beneficiary of this increased demand, but a recent analysis by the International Energy Agency shows that the other main industrial metals - aluminium, nickel and zinc - will also see a surge in demand. It would not be surprising if their prices continued to move in sync as they did over the past decades.


1 See “The Role of Critical Minerals in Clean Energy Transitions”, IEA World Energy Outlook Special Report, May 2021.
2 See
3 Demand forecasts for industrial metals are subject to a high degree of uncertainty given the long-time horizon considered and the possibility that new technologies will emerge, altering the demand profile compared to the scenarios considered.
In terms of demand growth relative to 2020 levels, cobalt, graphite, lithium, and the so-called rare earths will see the largest increases, albeit starting from very low levels.