In the past year, the materials industry has once again seen several shifts: increasing resource nationalism and protectionism, the rise of new demand vectors from AI and defense, emerging signs of a productive rebound, and the slowdown of decarbonization in selected regions.
Overall, the materials industry contracted in 2024, with metals and mining revenues down 6 percent to approximately $3 trillion, partially offset by growth in other materials sectors, while profitability remained resilient at about $1.3 trillion (with metals and mining accounting for $700 billion), coming with a shift in profit pools from thermal coal and steel toward gold, copper, and aluminum, a shift that has been ongoing for several years.
Geopolitical focus on materials has intensified, with new tariffs, incentives, and export barriers,1 while supply concentration continued to rise for several commodities in both mining and refining. Our analysis shows that measures primarily focus on commodities that appear on countries’ critical minerals lists and have high supply concentration (except for US tariffs).
Meanwhile, decarbonization progress has slowed in some regions. In Europe and the United States, for example, battery-electric-vehicle (BEV) sales as share of total car sales flattened or slowed compared with previous years. At the same time, bold innovation in technology, processes, and electrification has accelerated.
In summary, the materials industry has seen four significant shifts since last year’s report:
- Geopolitics and a global landscape where globalization is changing but not disappearing have led to increased resource nationalism or protectionism.2 This has created additional risks, such as inaccessible end markets and the need for local supply integration, as well as opportunities, such as financial incentives for new projects in resource-importing regions.
- Accelerated demand from the expansion of AI technologies will likely have a material impact on demand profiles, especially for copper—for example, projections show an increase in copper demand related to data centers of 3 percent by 2030, partially offsetting slowdown in demand from lower-carbon technologies.
- A recent capital intensity and productivity rebound is becoming visible in the mining industry—and several new technologies and practices have emerged that hold promise for continuing this trend, including generative AI.
- Decarbonization is slowing in selected regions and commodities, most notably in the European steel industry, in which nearly a third of announced projects have been put on hold or canceled. At the same time, thermal coal demand has continued to increase, with record production of eight gigatons (Gt).
Looking ahead, the demand outlook through 2035 appears robust across all scenarios. Primary drivers of this growth include population growth and the development of the middle class as well as the deployment of low-carbon technologies—with energy transition materials driving more than half of growth. In addition, demand growth could come from new applications, such as AI data centers, as well as potential additional upside from the defense sector. Together, China and the rest of Asia could account for more than 45 percent of this growth.
On the supply side, capacity ramp-up has kept pace with forecasts, with Chinese firms continuing to grow their market share outside of China. However, supply remains highly concentrated, and several key commodities (such as REEs) face persistent constraints. Although the global supply–demand gap is narrowing, closing it completely could require trillions of dollars in investment, massive new power capacity, and continued innovation.
In this context, we see three areas of opportunity:
- Pursue growth in the multilateral world by expanding into new geographies and critical materials—where you have a clear “right to play” with possible tailwinds from government incentives—or unlocking value from scrap, recycling, and niche high-growth sectors and products related to digital infrastructure and defense.
- Accelerate the productivity “rebound” through gen AI, automation, next-generation operational excellence, and global sourcing to counter productivity declines and rising costs from lower ore grades; labor shortages; environment, health, and safety requirements; and project complexity.
- Pursue targeted sustainability efforts by advancing decarbonization with stepwise, cost-effective approaches that cut emissions while scaling low-carbon processes, recycling, and circular business models—but don’t anchor business cases in green premiums (for now).
As 30 to 50 percent of TSR overperformance is driven by company operating decisions, top-quartile productivity and disciplined growth remain the clearest markers of long-term success, reflected in stronger margins, resilient returns, and lasting competitiveness. Although challenges ranging from tighter supply–demand balances to stricter decarbonization targets loom, bold innovators are already reshaping the competitive landscape.
