There is a well-worn phrase in financial market circles that “the trend is your friend”. Clearly, those following and investing in Artificial Intelligence (AI) trends in recent years will be nodding furiously in agreement with that mantra. In fact, there are probably ten trillion reasons why they love trends. More specifically, three companies perceived to be the biggest winners in AI – Apple, Nvidia and Microsoft – are now valued at a combined 10 trillion US dollars. However, financial trends can end. Often it will be an exhaustion of investment capital or over-investment which will kill a trend. But, maybe not this time.

We have previously written about the avalanche of investment capital pouring into the construction of data centres and the decarbonised industries of tomorrow. In parallel with these technology revolutions in cloud (AI) and climate (cleantech), there is a growing awareness of the massive spend required to keep up with electricity demand. As an illustration of the electricity grid pressures, US data centre power usage currently accounts for 22GW, or 4.5% of the nation’s power consumption. However, according to SemiAnalysis research, that figure is projected to reach 100GW, or nearly 20% of nationwide consumption by 2030 due to AI build-out.

Consultants, McKinsey, reckon the shift away from fossil fuels will require infrastructure investment of $9 trillion every year until 2050. That’s a great construction trend story but there’s a worrying basic materials story which could impact all trends; a shortage of base metals. For example, copper is critical to electrification and the storage of power/batteries. Consider these three numbers:

*S&P Global see global copper demand doubling from current 25 million tons per year to 50 million tons by 2035.

*For historical context, 700 million tons of copper has been produced over the course of human history. Net-Zero targets for 2050 demands that humanity produces two times more than it has ever produced, or 1.4 billion tons.

*There have been ZERO major new copper discoveries since 2014.

You get the trend. But, do the global mining industry and the giddy AI tech investment community ? Due to chronic underinvestment, planning delays, investment capital scarcity, genuine sustainability concerns, higher interest rates and AI tech excitement the global mining sector is currently projected to increase production by just….. 20% over the next 10 years. Indeed, the introduction of the EU’s Critical Raw Materials Act into law in 2024 is a reflection of a growing supra-national anxiety. The Act is an attempt to guarantee a supply for EU nations of 17 ‘strategic materials’ including copper for its green and digital transitions. Hopefully, investment capital will be diverted to the sustainable securing of new sources of critical materials but there’s a skills challenge too. Check out these snippets from the mining industry:

*More than half the mining workforce in the US (about 221,000 workers) is expected to retire by 2029.   

*A McKinsey survey found 71% of mining executives are finding a talent shortage is holding them back from delivering on production targets.  

*In the US there has been a 39% decline in mining graduations since 2016. In Australia, mining engineering enrolment has fallen by 63% since 2014.

The investment capital and skills challenges are not easy fixes for the mining industry. However, it seems inevitable that investment will be drawn to a neglected sector which is critical to the decarbonisation and digital transition of the global economy. For context, the $10 trillion number cited for just 3 companies dependent on electrical power stands in stark contrast to a valuation for the entire global mining sector of around $2 trillion. The continuing divergence of these two sectoral trends is manifestly not sustainable but we have spotted a few encouraging developments in the broader construction arena:

Labour mobility: A recent Bloomberg article on the success of the state of Texas attracting major data centre equipment manufacturers like Siemens, Schneider and Eaton. The key driver in these project decisions was the healthy 1 million-strong manufacturing workforce benefitting from a trend of people moving to southern states. Lesson 1: People and skills will move in a modern economy.

Labour trends: Gen Z employees are increasingly focused on purpose or ‘ikigai’ in their working lives. Well, the decarbonisation of the world seems like a decent start. So, it was intriguing to see a Wall Street Journal article this month headline an article on careers with “ Gen Z Plumbers and Construction Workers Are Making #BlueCollar Cool”. The emergence of TikTok and Instagram influencers in traditional trade work is attracting renewed interest from young Americans in the construction sector.  Lesson 2: Labour fashions can change.

Labour education: Microsoft might boast a $3 trillion valuation as a company but it also understands the value of access to skills necessary for its business growth. Check out Microsoft’s recent announcement investing €2.9 billion in Sweden over two years in cloud and AI infrastructure. Alongside the investment headlines, was an initiative to train 250,000 people in AI skills. Lesson 3: Labour learning grows wealth.

So, the above examples illustrate how companies, talent and capital are adjusting to massive growth in the construction of tomorrow’s infrastructure. Hopefully, these lessons will be urgently applied to the reversal of worrying mining trends. It should be clear by now that the futures of mining, construction, infrastructure and new technologies are inextricably linked. More bluntly, and using extremely basic maths, $10 trillion into $2 trillion just doesn’t go.


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Industry News


June 20, 2024



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