Anticipated global trends and challenges across long, medium and short-term time horizons inform Exxaro's strategic vision.
The Global Risks Report 2024 highlights extreme weather events, critical changes to the earth's systems, and biodiversity loss as dominant global risks over the next decade. Challenges are expected to intensify beyond 2035, and stricter environmental regulations, rising societal expectations and increasing demands for corporate responsibility are anticipated. Outcomes from COP29 further emphasise the urgency of addressing climate change, with the New Collective Quantified Goal increasing to US$300 billion annually by 2035 to assist developing countries with climate mitigation and adaptation efforts. COP29 also underscored the need for actionable climate plans and policy reviews ahead of COP30 to advance ambitious climate pathways.
As climate regulations tighten and stakeholder expectations rise, we are committed to ensuring our business remains resilient in a rapidly evolving policy and regulatory environment. We integrate climate risk considerations into our long-term strategy, ensuring alignment with global decarbonisation pathways and regulatory frameworks. Our commitment to achieving carbon neutrality by 2050 is supported by ongoing efforts to enhance operational efficiencies, strengthen governance structures, and embed climate resilience across our value chain.
The shift to a low-carbon world is driving significant changes in energy systems and markets. The Organisation for Economic Co-operation and Development's Global Material Resources Outlook to 2060 projects a doubling of global primary materials use by 2060, increasing environmental pressures and resource demands. The International Energy Agency's Global Critical Minerals Outlook 2024 highlights significant growth in demand for energy transition minerals vital for clean energy technologies, including renewable infrastructure and electric vehicles. As low-carbon electrification expands, the need for metals in decarbonised infrastructure will far exceed conventional requirements, making forward-facing metal intensity a critical factor in meeting global energy transition goals.
These trends present opportunities for Exxaro to diversify our portfolio, aligning investments with global trends to secure long-term value creation. By expanding into energy transition minerals, we aim to strengthen our position as a key supplier in the energy transition, ensuring a resilient and future-ready business that supports global decarbonisation efforts.
The global shift towards a low-carbon economy is reshaping the mining industry, presenting opportunities and challenges. Technological advancements drive shifts in resource demand, with innovations like alternative battery technologies for electric vehicles and energy storage showcasing how emerging solutions can impact market dynamics. Broader adoption of these batteries highlights how resource substitution could transform traditional supply chains. This example demonstrates the potential for shifts in mineral demand as broader technological trends continue to evolve, requiring careful strategic positioning. Furthermore, the low-carbon transition carries considerable socio-economic implications, influencing employment and economic stability in communities reliant on mining.
Exxaro proactively adapts to these changes by integrating technological foresight into our long-term planning. We monitor technological advancements to anticipate market shifts. Our iNNOVAXXION strategy harnesses digital innovation to enhance operational efficiency, resilience and strategic agility in an evolving energy landscape. As part of this, generative AI is expected to revolutionise data-driven decision making, enabling deeper insights, automation, and predictive capabilities to drive organisation-wide transformation. By integrating these advancements, we will strengthen our ability to adapt to market shifts, optimise resource management, and accelerate the delivery of our Sustainable Growth and Impact strategy, ensuring long-term value creation in a low-carbon future.
Recognising the socio-economic impacts of the low-carbon transition, we are committed to a transition that supports our employees and the communities in which we operate. This includes investing in skills development, building internal capacity and enhancing capability, and engaging with stakeholders to ensure our transition strategies are inclusive and equitable. By aligning our business strategies with emerging technologies and community needs, Exxaro aims to lead responsibly in the evolving energy landscape.
Over the medium to short term, external trends highlight the increasing importance of responsible resource management and sustainability. Investors are demanding greater transparency and alignment with ESG standards, while communities expect companies to play a more active role in local development. Workforce dynamics are also shifting, driven by the global race for energy transition minerals, a growing skills shortage, and the need for reskilling to adapt to technological advancements. For example, the World Economic Forum estimates that one billion jobs will be reshaped by technology within the next decade.
Exxaro is proactively addressing these trends through a balanced approach to stewardship. We prioritise long-term value creation for investors by optimising our coal assets while advancing our Sustainable Growth and Impact strategy. Investments in renewable energy and energy transition minerals align with global sustainability trends, ensuring resilience and competitiveness in evolving markets. For our employees, we focus on upskilling and reskilling programmes to equip them with the capabilities needed for future demands. We ensure our workforce remains agile and prepared for emerging challenges by embedding integrated ways of working and adopting new technologies. We are fostering partnerships for our communities that support local economic development and infrastructure improvements. These initiatives create shared value, enabling Exxaro to contribute meaningfully to socio-economic progress in the regions where we operate. For the planet, we are accelerating efforts to achieve our carbon neutrality target by 2050. Through resource efficiency, biodiversity enhancements, and adherence to international standards, we minimise our environmental impact and contribute to global climate goals. By aligning our stewardship approach with these external trends, Exxaro balances the needs of investors, employees, communities, and the planet, ensuring sustainable outcomes for all stakeholders.
Commodity markets are expected to navigate short and medium-term dynamics influenced by global economic, policy and market trends. In the short term, commodity markets are poised to reconnect with their respective fundamentals in 2025, as calmer financial market dynamics driven by a widespread monetary policy easing path and moderating inflation rates create an encouraging backdrop. However, uncertainties persist due to the implementation of proposed policies under the new US administration, potentially raising US interest rates, weakening the US dollar, and affecting global commodity and financial market sentiment. Over the medium term, evolving geopolitical and economic conditions, such as the demand for critical energy transition minerals, are expected to play a pivotal role in shaping market trends.
The seaborne coal market is expected to experience sustained demand in the short term due to the anticipated tight supply of high-energy coals, exacerbated by sanctions on Russian suppliers and a challenging investment and regulatory landscape. These constraints will likely sustain market demand, particularly in regions reliant on imported coal for energy security. While the broader energy transition continues to shape long-term trends, short-term supply pressures and geopolitical factors will play a key role in coal market dynamics.
A balanced and stable seaborne iron ore market is expected in 2025, driven by positive global steel demand. However, vulnerabilities in China's property sector and any additional government stimulus measures will remain critical to monitor. China accounts for over 50% of global steel production and is the largest consumer of iron ore, making its economic policies and construction activity pivotal for global demand.
The energy market continues to show positive long-term growth in diversified energy assets. In South Africa, the IRP outlines ambitious targets for renewable energy integration, aiming to diversify the energy mix and reduce reliance on coal. This framework presents significant opportunities for Exxaro to expand our renewable energy portfolio. Globally, supportive policies and favourable economics are also expected to drive a surge in renewable power capacity over the rest of the decade.
The shift to a low-carbon world is driving a surge in demand for energy transition minerals and metals, as decarbonisation infrastructure is far more metals-intensive than conventional systems. Low-carbon electrification remains a significant engine for demand, particularly as electric vehicle adoption accelerates and countries invest in grid modernisation and renewable energy infrastructure. While short-term delays in the global energy transition may arise from policies introduced by the new US administration, the longer-term outlook remains firmly anchored in global energy transition objectives. This sustained momentum is expected to support our energy solutions business, energy transition minerals and metals diversification plans, and broader strategic initiatives, positioning Exxaro to capitalise on the evolving market dynamics.
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