Scaling up metals for the low-carbon future
With demand set to soar for aluminium and copper in the energy transition, opportunities for companies and investors are rising, along with Australia’s prospects for export growth.
As the net-zero transition gathers pace, global focus is sharpening on the periodic table and the key minerals essential to decarbonisation.
While recent attention has zoomed in on the price slump of lithium, which has resulted in zero or negative margins for some producers, the outlook for copper and aluminium is considerably brighter.
Readily recyclable, copper and aluminium are major components in renewable and low-emission technologies used in wind turbines, solar panels and electric vehicle batteries. These metals are also central to Australia’s Rewiring the Nation program for efficient energy transmission and distribution.
Data from global resources research house Wood Mackenzie shows power supply across the world is expected to double by 2050 to meet surging demand, and that wind and solar’s share of supply may increase from 10 per cent today to more than 50 per cent by 2050.
Julian Kettle, Senior Vice President, Vice Chair Metals and Mining, Wood Mackenzie, notes that while primary demand for copper and aluminium is currently being driven by economic activity around construction, infrastructure and electronics, the impact of the energy transition will become more significant from 2030.
“The closer you get to a net-zero pathway, the more demand there will be for these commodities,” he says. “The energy transition starts and ends with metals.”
Supply and demand
Along with the energy transition, Kettle says the explosion of AI use and associated hyperscale data centres will place huge demands on metals supply chains that are already stretched.
“While the centres themselves have significant raw materials requirements, it is their huge power requirements and the need for associated reliable low carbon electricity generation capacity that will exacerbate the challenge of developing metals value chains and could help create a new supercycle,” he says.
Prior to US President Donald Trump’s tariff announcement in April this year, the price of copper was expected to hit more than USD 12,000 a tonne. Kettle expects the price to average USD 9,600 a tonne in the next 12 months and predicts aluminium will hit USD 2,500 a tonne.
“Over the next five years, global demand for copper is expected to grow by about 2.2 per cent, so we're going to need about 600,000 – 650,000 tonnes a year of additional copper supply to meet that demand,” says Kettle.
“Primary aluminium growth is a little more subdued at about 1.8 per cent average annual growth over the next five years, and that’s largely due to the rising availability of scrap, but the numbers are still quite large. Over five years, we’re going to require an additional 1.3 million tonnes a year of primary aluminium supply.”
That’s positive news for resource-rich Australia, but there’s a risk of missed opportunities as companies grapple with economic uncertainty enhanced by trade tensions, Kettle believes. “The risk is that many corporates are saying, ‘Well, we don't really know how things are going to pan out with the tariffs, so we'll sit on our hands in terms of deploying capital’.”
Elsabe Muller, President at Alcoa Australia, anticipates widespread effects. While the company, which produces bauxite, alumina and aluminium in Western Australia (WA) and Victoria, does not export materials to the US, prevailing geopolitics could have “major global impacts across any markets and commodities”, Muller notes.
“Despite a lot of global trade uncertainty at present, the outlook for Australian commodities remains strong,” Muller says. “Potential new and expanded trade agreements between Australia and other regions could also offer some upside.”
A land of plenty
Growth in refined material production of critical minerals is heavily concentrated among a handful of countries. While Australia has some of the largest recoverable deposits in the world, China dominates the global supply chain market and Latin America supplies 40 per cent of the world’s copper.
The US is seeking to strengthen its leadership in critical minerals with the government recently fast-tracking the permissions process for 10 mining projects, however Kettle says the impact is unclear. “There is movement on permitting, but it isn't resulting in the major miners saying ‘let's go for it’,” he says.
The need for secure and reliable sources of critical minerals is high on the agenda of governments worldwide, with leaders at this year’s G7 summit in Alberta, Canada, agreeing on a Critical Minerals Action Plan, which includes diversifying responsible production and encouraging investment. The action plan was endorsed by the Australian Government, which this year announced an initial investment of AUD 1.2 billion for a Critical Minerals Strategic Reserve.
Global miners are also advancing their interests, with BHP bidding AUD 60 billion for Anglo American to expand its position in the copper market in 2024. BHP predicts global copper demand will grow by around 70 per cent to over 50 million tonnes a year by 2050.
Australia is currently the world's sixth-largest copper producer, with annual output of approximately 870,000 tonnes.
Andrew Strongman, Westpac’s Global Head of Mining and Metals, notes that while Australia has a number of significant copper projects, it’s not a commodity like iron ore that we naturally enjoy a geological advantage in. Copper also needs to be processed (smelting and refining) before end use, so there’s the additional challenge to be self-sustaining in terms of downstream processing.
“The long-term outlook for copper is strong, but do we have the scale to invest in downstream processing in Australia and compete effectively globally? This won’t be easy,” he says.
Kettle agrees. “If Australia is to take its place in feeding both itself and the world with refined copper, it will require incentives,” he says. “The capital costs of building a copper smelter refinery complex in Australia could be two to three times what it would be in China, and the operating costs would also be significantly higher.”
When it comes to primary aluminium, Australia is the world’s seventh largest producer, with production in 2024 reaching 1.58 million tonnes, approximately 1.50 million tonnes was exported.
“Australia is one of the few nations that supports the entire value chain for aluminium, from mining to fabrication,” says Muller. “Likewise, aluminium is one of a small number of materials in Australia for which the entire value chain exists.”
Critical versus strategic
Copper and aluminium are among six metals on Australia’s Strategic Materials List for their global importance for decarbonisation. Strategic materials were differentiated from the critical list in December 2023 as their supply chains were deemed “not vulnerable enough” to meet the criteria. This is being disputed by the Australian Aluminium Council (AAC), which includes members such as Rio Tinto and Alcoa.
“Alcoa and other members of the AAC continue to push for bauxite, alumina and aluminium to be given critical minerals status,” says Muller. “This would help strengthen the case for federal and state governments to focus on several key areas, such as delivering internationally competitive supplies of clean energy.”
While critical minerals play a vital role in decarbonisation, their mining and production leaves a hefty carbon footprint. The aluminium sector, for example, accounts for 1.1 billion tonnes, or about two per cent of the world’s total CO2 emissions. The federal government’s Safeguard Mechanism reform requires industrial, manufacturing and resources companies to cut carbon emissions by almost five per cent a year through 2030.
Muller sees advantages in the Safeguard Mechanism providing the long-term policy stability critical for future investment. “At the same time, we accept the Safeguard Mechanism will continue to evolve, but we must retain those elements that allow Australian industries like the aluminium sector to find least-cost abatement pathways.”
Initiatives such as the Federal Government’s AUD 2 billion Green Aluminium Production Credit, available from 2028–29 as part of the Future Made in Australia plan, will also support aluminium smelters to transition to renewable electricity.
Muller notes that Alcoa is focused on further decarbonising its alumina refining processes. This includes trialling electric calcination at its Pinjarra Alumina Refinery in WA. The final stage in the refining process, calcination requires significant energy input that’s currently derived from fossil fuel sources.
“Under the pilot project, renewable energy will drive the calciner, eliminating carbon emissions and allowing residual energy currently lost to the atmosphere as steam to be captured and reused,” says Muller.
While demand for copper and aluminium is primarily being driven by economic activity, Kettle says the energy transition will escalate demand within the next decade. “Ultimately, we cannot deliver an energy transition without metals,” he says. “And if you want to generate, transmit, store or use low-carbon electricity, you cannot do that without metals.”
Strongman says the outlook for the Australian market is bright, thanks to an abundance of quality resources and a highly skilled mining sector. “But this cannot be taken for granted and all stakeholders need to work together to ensure we make Australia an ongoing attractive investment proposition.
“Our commitment to supporting a lower carbon future is playing out right across Westpac and in the resources sector, and our focus is firmly on supporting the minerals required. The fundamentals for copper and aluminium are strong, but we understand commodity prices can fluctuate. The experience and understanding that the Westpac team provides can be invaluable through the cycle.”
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