The global push for green energy and electric vehicles (EVs) is expected to spur demand for critical minerals that Australia has in abundance.
The energy transition will require a "vast supply response in the next two decades" and investments that miners are well-positioned to make, Fitch Ratings says in a report released on Thursday.
The energy transition will "significantly increase" demand for metals used in making EVs and renewable power equipment, such as copper, nickel, cobalt and lithium, Fitch says.
Renewable power generation and EVs are more metal-intensive than fossil fuel-based alternatives, which Fitch said would support metals demand as the world transitions to towards a carbon-free economy.
"Supply gaps might emerge after 2025, as the pipeline of new projects is not yet synchronised with the expected rise in demand created by the energy transition," Fitch says.
Australian-listed lithium leaders including Pilbara Minerals and Allkem, and copper and nickel newcomers Nico Resources and Ardea Resources, were among critical minerals firms that rallied in morning trade.
But Fitch warns growth rates for each metal will vary, depending on technologies chosen for batteries and power generation as well as governments' environmental policies on mining.
Demand for energy-transition metals is expected to peak by the 2040's, when the bulk of low-emission infrastructure will have been built.
The International Energy Agency (IEA) expects the energy change to lead to a sixfold increase in demand for minerals by 2050 compared with current levels.
Buyers also expect miners to deliver increasing volumes of metals required for the energy transition without compromising on ESG (environmental, social and governance) standards, Fitch says.
"The key challenge is to reduce greenhouse gas emissions across the metal value chain," the report says.
"Emissions intensity of cobalt, aluminium and nickel mining and processing is high, so skyrocketing demand may result in rising net carbon footprints."
Electricity generation is the largest source of emissions in metals production, requiring a shift in power sources and changes in production technologies and increased metal recycling to cut carbon intensity further.
