The world’s largest copper producers have said they don’t have enough mines in operation to produce enough metal to meet demand as the transition to clean energy continues. The announcements come as miners have seen metal prices fall due to a weaker global economy and rising inflation, making executives, investors and banks more wary of funding new projects.
With new supplies also constrained by labor shortages, there are concerns about decarbonization, as copper is an important component for electric vehicles and grid upgrades. Kathleen Quirk, president of Freeport-McMoRan, the largest U.S. copper producer, said higher copper prices alone will not be enough to provide the metal needed for the green transition.
“It’s not just about price anymore. There are other factors that are really going to limit how quickly we can ramp up supply,” she said on the sidelines of the FT Mining Summit. “The net effect is that this energy transition is going to take a lot longer.”
Copper prices have fallen 4% this year to around $8,000 a tonne, from a peak of over $10,000 last year, as global growth has slowed and output from new mines in Peru and Chile continues to rise. However, demand for the commodity is expected to rise to fuel a green economy and support economic recovery in India and other developing countries.
According to Anglo American, one of the world’s largest mining companies, the average Westerner needs 200-250 kg of copper per person to maintain their standard of living, compared to the global average of 60 kg. Copper is used in a wide range of products, from electrical wiring and household appliances to infrastructure such as trains. As the world transitions to green energy, the use of the metal will increase, which is why it is called the “metal of electrification”. At the same time, according to S&P Global forecasts, the market will double to 50 million tonnes by 2035 compared to 2021 levels, with a “chronic gap” expected between supply and demand. Ivanhoe Mines billionaire founder Robert Friedland also told the FT summit that the current price decline would lead to further shortages.
Despite expectations for significant growth, copper producers have found it difficult to build large-scale projects as the metal becomes increasingly difficult to find in large quantities underground. Freeport, for example, has decided to use a new technology to extract copper from mining waste before expanding its mines.
According to Farid Dadashev, head of European metals and mining at RBC Capital Markets, executives are reluctant to invest in mines that would take 10-15 years to build and cost billions of dollars, given low prices and political uncertainty in mining jurisdictions.
“When you add in the additional complexity of longer permitting times, higher inflation and the overall declining quality of ore bodies, it may explain why we find ourselves in a situation where there is likely to be a shortage of copper to meet decarbonization goals over the next few decades,” he said.
Copper producers are increasingly talking about a potential shortage later in the decade, which would force innovation to replace and reduce the use of the metal in various products, although it is unclear how far that might go.
“There will be some restructuring of demand,” said Maximo Pacheco, chairman of Codelco, the Chilean state-owned mining group that produced its lowest copper volumes in 25 years in 2022.
In some cases, cutting metals supplies could create a trade-off between meeting decarbonisation targets in the economy and efforts to lift large parts of the world out of poverty without political interference.
“At some point, something has to give,” said Anglo American chief executive Duncan VanBloed.