Short circuit in the copper market. The so-called “electrification metal”, a key element of the energy transition and destined to become the oil of this century, is capturing all eyes.
Due to its increasingly higher price. And because of its growing scarcity, with a structural deficit destined to last for years. This is how the repeated thefts of this material are understood, from the most recent cases at Catalan train stations to the Tesla fast chargers in San Francisco.
Or the desperate attempts of the mining company BHP, so far without success, to get hold of its counterpart Anglo American. Its offer, which has reached 43,000 million euros, has been rejected three times. And it is the company’s copper business, with mines in Chile and Peru, which represents a third of Anglo American’s income, with annual growth of around 30%, that really interests BHP.
Metal prices have risen by around 30% in 2024, are at a two-year high and are around their historical record. Citigroup predicts an explosive rise in the next three years, in what it has described as the second bullish cycle of this century. The first for commodities and in particular for minerals was at the beginning of 2000, with the economic boom in China, when the price of copper multiplied by five in a decade. This time the bounce may last longer.
According to Joachim Bertebach, CEO of Earth Resource Investments, to the DW agency, “if we really want to get out of fossil fuels, we are going to need the same amount of copper in the next three decades as in the entire previous historical period.” The investment bank Goldman Sachs, in a note this month, even proposed scenarios that were unthinkable until recently. “In the absence of a short-term solution, the only way to keep the copper market functioning would be to ration demand.” Forecasts point to a 50% increase in consumption by 2050.
In a report titled “The Future of Copper” prepared by SP Global, disturbing conclusions are reached. “In the 21st century, copper shortages emerge as a destabilizing threat to international security. Shortages will put value chains under unprecedented stress. This reminds us of what was experienced in the 20th century with oil, but with copper this can be accentuated by an even higher geographical concentration when refining industrial products. Current development projects will not be enough to compensate for the lack of supply, even if authorizations and construction were to be accelerated.”
What happen? The energy transition needs copper: for electric vehicles, to boost networks, even for heat pumps, destined tomorrow to replace boilers or solar panels and batteries. To this we must add the development of data centers for Artificial Intelligence. Even the defense boom, with the wars in Ukraine and the Middle East, plays in favor of the copper metal, because it is a key element for the production of projectiles and ammunition: military drones and other electronic equipment use copper.
Instead, on the production front, bad news is flourishing. First Quantum’s Panama copper mine (1% of world production) was recently closed, an operation that became the epicenter of environmental protests and which received an adverse ruling from the country’s Supreme Court. According to UN Trade and Development (United Nations), to reach net zero emissions targets by 2030, the industry could need around 80 new copper mines. With investments of hundreds of billions of dollars.
The problem is that for years it was not invested and currently the economic profitability of new capital remains to be seen. The most recent estimates from the US Geological Survey estimate that there are about 3.5 billion tons of copper left to discover, compared to the 2,100 already explored. Therefore, it is not that copper is exhausted, but that it must be extracted and this has a cost. And according to S
Because the average start-up time for a copper mine is 15 years (and rising). There are extreme cases, such as the Bystrinskoye mine in Russia: it has taken 32 years to become operational while the Celestial, in the Philippines, discovered in 1993, began operating in 2022. The current drought – the mines consume a lot of water – not only has affected the performance of the farms, but they represent an unknown factor in attracting new capital.
Oriol Guixà, CEO of the metallurgical firm La Farga, explains that today on average it is necessary to move twice as much earth as twenty years ago to obtain the same quantities of copper. “We are facing a problem of mismatch between supply and demand,” he acknowledges.
Furthermore, it must be considered that some of the deposits with the most potential are located in sensitive areas for investment, as is the case of the Democratic Republic of the Congo. Indeed, the geopolitical factor should not be underestimated. A recent World Bank report highlights how increasing trade restrictions will affect metal prices. For example, the veto on mineral trade from Russia, in addition to limitations on sales abroad from Myanmar or Indonesia could also affect the price of copper. It is estimated that by 2035 the United States may be forced to import up to 67% of its annual copper metal needs: a dangerous dependency.
Who can benefit from this situation? The International Energy Agency estimates that in 2050 mineral production will provide more income than fossil fuels. China is the world’s leading processor of copper, it has reserves but is also a large consumer. Its smelters are at maximum capacity, which has also contributed to aggravating supply disruptions. Latin America has more than 40% of copper reserves, with Chile being the absolute leader. “Everyone we met at the 2024 World Copper Conference in April believed the market would be in deficit this year. Some people commented that there could be a deficit every year,” explained Alice Fox of Macquaire.
Ramon Monros. Purchasing manager at Prysmian, a leading American multinational cable company based in Vilanova i la Geltrú, explains that they have insurance coverage to cover price fluctuations. However, refining costs have increased and the current increase in the cost of basic raw materials will end up having an impact in some way on the final consumer. According to SP Global, the biggest supply crisis is yet to come: the difference between demand and supply would occur in 2035, with a deficit of close to 10 million metric tons. The future, more than gray, is a sinister copper color.
