ARKANSAS, Sept 1 (Future Headlines)- The global green transition is at the forefront of efforts to combat climate change and shift towards a sustainable, low-carbon future. Central to this transformation are metals like copper, which play a pivotal role in expanding and upgrading power grids, manufacturing electric vehicles (EVs), constructing wind turbines, and developing solar farms. However, as demand for these crucial metals surges, so does the risk of illicit activities such as metal theft and fraud, which can have far-reaching consequences for the green economy and industries involved in the metal supply chain.

The recent revelation of a substantial inventory shortfall at the German copper producer Aurubis due to alleged illicit activities has sent shockwaves through the industry. Aurubis shares plummeted by 15% following the announcement, underscoring the severity of the issue. This essay delves into the implications of such criminal activities on the green transition, highlighting the growing concerns surrounding metal theft and fraud in a world increasingly reliant on these resources.

The case of Aurubis is just one of several recent incidents that have exposed the vulnerability of the metal supply chain to fraudulent activities. Earlier this year, global commodity trader Trafigura suffered a significant financial blow when it discovered that some nickel cargoes it had paid for did not contain the promised commodity. These instances raise alarm bells about the integrity of metal transactions, particularly when demand is set to outstrip supply for metals critical to the low-carbon transition.

  • The growing demand for copper and key metals

Copper, often referred to as “Dr. Copper” due to its sensitivity to economic trends, has emerged as a linchpin in the green transition. This versatile metal is used in an array of applications, from wiring for electrical systems to the lithium-ion batteries that power EVs. As nations worldwide accelerate their efforts to electrify transportation, upgrade power grids, and transition to renewable energy sources, the demand for copper is skyrocketing.

The International Energy Agency (IEA) projects that global production of refined copper products may grow by 4% year-on-year, reaching approximately 26 million metric tons by 2023. McKinsey, a global management consulting firm, anticipates further growth to around 30.1 million tons by 2031. However, the consultancy warns that global demand for copper will reach a staggering 36.6 million tons at the beginning of the next decade, leaving a supply-demand gap of over 6 million tons annually.

This widening chasm between supply and demand presents a multifaceted challenge for the green transition. On one hand, it underscores the urgency of ramping up production to meet the ambitious targets of countries committed to reducing carbon emissions. On the other hand, it amplifies the risks associated with the production and distribution of metals, making them more attractive targets for criminal activities.

The rush to electrify the world’s economies, combined with supply bottlenecks exacerbated by factors such as disruptions caused by the COVID-19 pandemic and geopolitical tensions, has driven up the prices of metals essential for a low-carbon economy. Copper, aluminum, lithium, and rare earth metals have all experienced significant price increases in recent years. While these price surges can benefit producers, miners, and traders dealing in these commodities, they also render these assets more susceptible to fraud and theft.

  • The rising threat of metal theft

Metal theft is not a new phenomenon, but its consequences have grown more pronounced in the context of the green transition. Criminals are increasingly targeting metals like copper, which have become highly valuable due to their central role in building a sustainable future. This shift in criminal focus raises several critical concerns:

Economic impact: Incidents like the Aurubis inventory shortfall can have severe economic repercussions. In Aurubis’s case, the missing metals could translate into a hit of at least 100 million euros, approximately one-fifth of its projected annual pre-tax profit. Such financial losses can disrupt the operations of metal producers, potentially leading to delays in meeting demand for essential components of the green economy.

Supply chain disruptions: Metal theft disrupts critical metals’ already fragile supply chains. This can result in delayed production of renewable energy infrastructure, EVs, and other low-carbon technologies. These delays, in turn, hinder the world’s progress towards achieving its climate goals.

Increased costs: As metal theft and fraud incidents rise, businesses within the metal supply chain may face increased insurance costs and security expenses. If passed on to consumers, these costs could contribute to higher prices for green technologies and renewable energy, potentially slowing their adoption.

Environmental impact: Beyond the economic consequences, metal theft can have environmental implications. Delayed projects in the renewable energy sector mean continued reliance on fossil fuels, exacerbating climate change and impeding the global shift to cleaner energy sources.

Reputation damage: For companies in the metal industry, incidents of theft and fraud can damage their reputation and erode trust among customers and investors. This can have long-term consequences for their ability to attract capital and secure contracts for green projects.

  • Addressing the challenge

To mitigate the growing threat of metal theft and fraud, several strategies and actions should be considered:

Enhanced security measures: Businesses involved in the metal supply chain should invest in robust security measures, including surveillance, secure storage facilities, and secure transportation protocols. This can deter criminals and protect valuable inventory.

Transparency and traceability: Implementing transparent supply chain practices and digital tracking technologies can help monitor the movement of metals at every stage, making it easier to detect irregularities and prevent fraudulent activities.

Regulatory frameworks: Governments and international bodies should work together to establish clear regulatory frameworks for metal transactions. These regulations should encompass licensing requirements, penalties for illegal activities, and international cooperation to combat cross-border metal theft.

Public awareness: Raising public awareness about the consequences of metal theft and fraud can help deter potential criminals. It can also encourage individuals to report suspicious activities and cooperate with law enforcement agencies.

Recycling initiatives: Recycling programs for electronic waste and discarded products containing valuable metals can reduce the incentives for theft by providing a legal and sustainable source of these materials.

The green transition is a global imperative, and securing the metal supply chain is integral to its success. As the world accelerates its efforts to combat climate change and embrace a sustainable future, tackling the rising threat of metal theft and fraud must become a priority for governments, businesses, and society as a whole. Failure to do so could undermine the progress made towards a low-carbon economy, jeopardizing the planet’s future.

Reporting by Sarah White