The global metals and mining industry is entering a new era. Historically, the industry has been driven by economic growth and the development of the middle class, resulting in major demand growth for materials such as steel, aluminum, and coal. While 80 percent of the industry today primarily consists of five materials—steel, coal, gold, copper, and aluminum—the landscape is rapidly changing as a result of the energy transition.
Indeed, the energy transition is first and foremost a physical transformation and the key challenges are therefore mostly physical, including the timely availability of materials embedded in low-carbon technologies (as detailed in McKinsey Global Institute’s 2024 report, The hard stuff: Navigating the physical realities of the energy transition). The energy transition is changing the materials landscape in three ways:
- It accelerates demand growth for materials that are embedded in low-carbon technologies as these technologies typically require more embedded materials than their conventional counterparts. For example, battery electric vehicles (BEVs) are typically 15 to 20 percent heavier than comparable internal combustion engine (ICE) vehicles.
- It triggers a long-term shift of the materials demand profile as low-carbon technologies require a different set of energy transition materials, which is gradually increasing the relative importance of these materials in the overall metals and mining portfolio.
- It drives a long-term reduction of thermal coal in the energy system, currently the second largest material in metals and mining measured by revenue (2023).
Key materials for the energy transition are crucial to achieve decarbonization in the global energy system—and a lack of sufficient and affordable supply would therefore risk hindering the at-speed deployment of crucial low-carbon technologies. This report aims to provide a fact base and perspective on the need to scale these materials sustainably and affordably. We present a view of the possible road ahead, based on data from approved, publicly available sources, checking this view against three energy transition scenarios differentiated by the speed of the transition as well as two supply scenarios modeled by McKinsey Metal&MineSpans and based on asset level insights.
The road ahead will inevitably bring challenges, including how to accelerate the scaling of supply to meet new demand patterns, how to keep materials affordable so they can continue to support the energy transition and fuel economic growth, and how to improve the sustainability of the industry. This is not simple, especially in the context of an evolving global policy landscape that further increases uncertainty for investors.
However, we are hopeful that the industry’s response to the energy transition also presents substantial business opportunities for incumbents and new entrants alike, whether from conscious portfolio shifts, disruptive innovation, new business models, or the next wave of operational and capital expenditure (capex) advances, in some cases enabled by AI.
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