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Metal Depletion: How to Adress the Issue. Patrik Söderholm, LTU
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Metal Depletion: How to Adress the Issue. Patrik Söderholm, LTU

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Kommer de utvinningsbara metallerna ta slut? Finns det en "peak metal"-tidpunkt? Patrik Söderholm från LTH svarar på alla frågor.

Kommer de utvinningsbara metallerna ta slut? Finns det en "peak metal"-tidpunkt? Patrik Söderholm från LTH svarar på alla frågor.

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Metal Depletion: How to Adress the Issue. Patrik Söderholm, LTU Metal Depletion: How to Adress the Issue. Patrik Söderholm, LTU Presentation Transcript

  • Metal Depletion:How to Address the Issue Patrik Söderholm Economics UnitLuleå University of Technology
  • Fears of impending metal depletion: past and present• The Classical Economists (e.g., Malthus): 1800-1880• The Conservation Movement: 1900-1920• World War II and the early post-war period: 1940-1960• Club of Rome: 1972• Peak oil and peak metals: 2000- Source: Laherre (2010).
  • Questions• What do we mean by resource depletion, and how could it be measured?• Looking backward: is there evidence of metal depletion? We address two different – but often-used – measures, using the case of copper (Cu) as an example• Looking forward: what can we expect from the future?
  • (1) Reserve-to-production ratioFor copper this ratio is about 30, thus indicating a 30 year lifeexpectancy at a 0 percent growth rate in consumption. Model run from the Club of Rome (1972)
  • (1) Reserve-to-production ratioAt current rates of consumption the copper found in the earth’s crust – i.e.,the resource base – would last 120 million years. Reserves defined bothby knowledge and economic availability.For copper the reserve-to-production ratio has been about 30 for decades.A mining firm will not invest in reserve creation beyond its perceivedcurrent needs. As with any inventory proved reserves have increased notdespite interim production but because of it!!We need to consult economic measures of mineral availability!
  • (2) The long-run development of real prices Copper prices, 1850-2010 (US cents per lb)
  • (2) The long-run development of real prices Copper prices, 1850-2010 (US cents per lb) Average Average Average ore grade ore grade ore grade ~6% ~2% ~1%
  • Intepreting price changes over time Copper prices, 1850-2010 (US cents per lb) Periods of economy- wide shocks
  • Copper prices and costs, 1998-2007 (USD $ per ton Source: Radetzki (2009)
  • Copper prices and costs, 1998-2007 (USD $ per ton Rio Tinto forecast for China in 2000: •China’s steel production in 2000 was 125 Mt •”We in Rio Tinto thought it would plateau at 200 Mt” •In 2006 it was 400 Mt Source: Radetzki (2009)
  • More relevant? The Cost of Satisfying HumanNeedsExample: the real cost of ”light”The real prices of kerosene and electricity fell by 25 and97 percent over the period 1883-1993.However, the real cost of a lumen fell by 99.9 percentover the same time period.Source: Nordhaus (1997).
  • The ”Peak” Guide to the FutureBuilds on an estimate of Ultimately recovarable resources (URR) andthe notion that a drop in discoveries signals increased resourcescarcity, and ultimately a decline in production. However, this approach tends to downplay the importance of acknowledging exploration and production activities as determined by economic decisions, which will be heavily influenced by prices.
  • With higher prices the rate-of-return onexploration activities and mining R&D increases
  • More generally, higher metal prices will……Demand•lead to a decrease use and stimulate the substitution to other materialsand increase the rate-of-return on R&D for identifying cheap substitutes.Supply•Increase exploration activities and make abandoned deposits profitable.•Increase in investments in new capacity.•Increased efforts to improve current production and explorationtechnology.In this race between the cost-increasing effects of increased scarcity and the cost-reducing effects of new technology, the long-run outcome is simply unknown!!! Also, this does not happen suddenly!
  • Karl Popper (1957) ”The total supply of any mineral is unknown and unknowable because the future knowledge that would create mineral resources cannot be known before its time”