According to foreign media on October 9, several of the world's largest copper producers warned that there are not enough copper mines currently under development to provide enough copper to keep up with the pace of clean energy transition.
The warning comes as miners struggle with falling metals prices amid a weak global economy and cost inflation, making executives, investors and banks wary of financing new projects.
At the same time, labor shortages are also hampering new supply and there are concerns about the transition to carbon-free electricity, as copper is critical for making electric vehicles and upgrading the grid.
Price increases are no longer enough to ensure supply
Kathleen Quirk, president of Freeport-McMoran, the largest copper producer in the United States, said that rising copper prices alone are not enough to ensure that there is enough metal for the global move toward green energy.
“It’s not just about price now. These other factors will really limit how quickly we can develop supply," she said on the sidelines of last week's Financial Times Mining Summit. "What may end up happening is that this (energy transition) will be prolonged for a longer period of time."
Copper prices have fallen 4% this year to around $8,000 a ton, down from last year's peak of more than $10,000 a ton, as global economic growth slows and output from new mines in Peru and Chile has been increasing.
However, demand for this commodity is expected to grow rapidly, supporting the green economy and supporting the economic rise of India and other developing countries.
Demand is huge and the size of the copper market will double
According to data from Anglo American, one of the world's largest miners, the average person in the West needs 200-250 kilograms of copper, compared with a global average of 60 kilograms.
Copper is used in everything from electrical wiring to household appliances to infrastructure such as trains.
As the world undergoes a green transition, copper will be used in ever-increasing amounts and has been dubbed the “electrifying metal.” S&P Global forecasts that the copper market will double in size to 50 million tons by 2035 compared with 2021 levels, with the company predicting a "secular gap" between supply and demand.
Billionaire mining tycoon Robert Friedland, the founder of Ivanhoe Mines, also spoke at the summit, saying the current round of price weakness would exacerbate shortages later.
Insufficient large-scale projects and shortage of copper in the cards
Although copper production is expected to grow significantly, copper producers are still struggling to develop enough large-scale projects as the commodity becomes increasingly difficult to extract in large quantities underground.
Freeport, for example, is using new technology to extract copper from old mining waste piles before expanding the mine.
Executives have proven reluctant to invest in mines, which take 10-15 years to build and cost billions of dollars, said Farid Dadashev, head of European metals and mining at RBC Capital Markets. Sales prices are low and political uncertainty in mining jurisdictions is high.
He said: “When you add further complexity from factors such as longer permitting timetables, higher inflation and generally declining ore body grades, this may explain why we find ourselves in a situation where there may not be any over the next few decades. A scenario where sufficient copper is available to meet decarbonization targets.”
Copper miners are increasingly convinced that shortages are likely to occur later this century, driving innovation to replace and reduce the use of copper in products, although it is uncertain how far this will go.
Supply shortages require demand to make concessions
"There will be some restructuring of demand," said Maximo Pacheco, chairman of Chile's state-owned mining group Codelco. In 2022, the company's copper production fell to its lowest level in 25 years.
For some, tight supplies may leave them weighing the trade-offs between achieving their goals of decarbonizing the economy and lifting much of the world out of poverty without policy intervention.
“Something has to give in this process,” said Duncan Wanblad, chief executive of Anglo American.
