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Capital discipline sustains balance sheets as energy transition creates long-run demand

Last update – July 2026

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SENSITIVE RISK FOR ENTERPRISES

Strengths & weaknesses

  • Long-run demand for critical metals - lithium, cobalt, nickel, copper, rare earths - is underpinned by structural growth in EV manufacturing, renewable energy infrastructure and semiconductor production, with demand for critical minerals projected to triple by 2030 under net-zero scenarios.
  • Many major mining companies emerged from the 2021 commodity boom with strong balance sheets, having accumulated cash and reduced debt rather than pursuing aggressive expansion; this financial resilience provides a buffer against market volatility.
  • Governments globally are prioritising critical mineral security, creating policy tailwinds in the form of expedited permitting, strategic reserve purchases and direct investment support for domestic production.
  • Base metal prices, though off their 2022 peaks, remain above long-run historical averages for many categories, sustaining industry profitability at current production levels.
  • The sector's supply chains are highly globalised and therefore vulnerable to geopolitical shocks: trade disputes can rapidly translate into export restrictions on critical inputs, as demonstrated by China's curbs on rare earths and graphite exports.
  • Escalating ESG and environmental regulatory requirements - covering carbon emissions, land use, water management and community relations - are increasing compliance costs and contributing to project delays, particularly for new mine development.
  • The sector is inherently capital-intensive with long project lead times (over 10 years from discovery to production for new mines), making it difficult to respond quickly to demand signals and creating structural supply-demand mismatches.
  • Commodity price volatility remains high: base metal and bulk material prices are closely tied to Chinese industrial demand, global growth cycles and financial investor positioning, all of which can shift rapidly.

Sector overview

What to watch ?

 

  • Critical mineral policy and resource nationalism: Governments are treating strategic minerals as national security assets, leading to new export controls, domestic content requirements and investment screening measures that are reshaping global supply chains.
  • China's industrial demand trajectory: China consumes over two-thirds of the world's base metals and iron ore. Its construction and manufacturing activity - and the pace of its own domestic decarbonisation - will continue to set global metal price trends.
  • Financing conditions and capex discipline: After the 2021 boom, the sector has maintained conservative capital allocation. Any shift toward aggressive expansion would represent an early signal of supply growth that could eventually weigh on prices.
  • Energy transition metal demand: The ramp-up of EV production, battery storage, wind turbine installation and grid expansion is creating accelerating demand for copper, lithium, nickel and cobalt that differs structurally from traditional industrial metal demand.
  • Environmental regulation and permitting: Stricter environmental standards and community opposition are making it increasingly difficult and time-consuming to bring new mines into production in key jurisdictions, constraining supply response even when prices are supportive.

The global metals and mining sector supplies the essential raw materials - from iron ore and steel to copper, gold, lithium and rare earth elements - that underpin industrial development and the global energy transition. In 2025, gross output for the basic metals and metal products industry reached approximately USD 9.6 tn globally. Asia-Pacific, dominated by China, accounts for around 60% of the global market. Europe is a distant second at approximately 21%. This regional concentration reflects China's position as by far the largest producer and consumer across the metals spectrum, from steel and aluminum to rare earths. Gross output for basic metals and metal products is estimated at approximately USD 10.4trn in 2026, with the 2026-2028 gross CAGR projected at approximately 7%.

After windfall profits during the 2021 commodity super cycle, the sector experienced a normalization in financial performance through 2023-2024. Prices for many base metals and bulk materials retreated from their peaks, while input costs (energy, reagents, labor) remained elevated. The aggregate EBITDA margin for the global metals and mining sector sat at approximately 15% in 2025, reflecting continued normalization from the elevated levels of the 2021 boom. Companies have responded with capital discipline: excess cash from the boom was largely returned to shareholders rather than committed to new capacity, keeping balance sheets strong but constraining future supply growth. This conservative posture is maintaining profitability at current price levels but may create a supply shortfall as energy transition demand for critical minerals accelerates.

The structural long-term demand story for the sector is compelling, particularly for the subset of metals critical to the energy transition. Copper, which is essential for electrical wiring in EVs, wind turbines and grid upgrades, is expected to face significant supply deficits as demand accelerates faster than new mine capacity can be developed. Lithium demand is projected to grow eight-fold by 2040 under net-zero scenarios. Rare earth elements are increasingly strategically contested, with China's dominance in processing creating a geopolitical dimension that is driving significant investment in alternative supply chains in the US, Europe and Australia. For bulk materials - iron ore and steel - the picture is more mixed, with Chinese demand remaining the swing factor and the energy transition simultaneously creating both headwinds (reduced steel demand as fossil fuel infrastructure investment declines) and tailwinds (new steel demand for wind towers, EV infrastructure and buildings retrofit).

 

Subsectors

1.      Steel production: The world's most widely used metal, critical for construction, automotive and industrial applications. The largest single segment of the metals sector by volume; increasingly subject to decarbonisation pressure as steelmaking accounts for approximately 7% of global CO₂ emissions.

2.      Base metal mining: Mining of non-ferrous metals including copper, aluminium, zinc, nickel and lead. The base metal mining market was valued at approximately USD550bn in 2024 and is projected to reach USD750bn by 2030, driven by energy transition demand.

3.      Iron ore mining: Mining of iron ore for steelmaking. Demand is closely correlated with Chinese steel production and global construction activity.

4.      Metal processing and manufacturing: Processing of raw metals into finished products and components, including aluminium rolling, copper wire drawing and precision metal parts. Closer to end markets than mining and more sensitive to manufacturing cycle fluctuations.

5.      Precious metals mining: Mining of gold, silver and platinum group metals, primarily for jewellery, investment and industrial applications. Gold has traded near all-time highs as investors seek inflation hedges and safe-haven assets.

Contact 

Ano Kuhanathan
Allianz Trade
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