The Elements of Innovation Discovered

Demand and deficit drive up copper price

Metal Tech News - October 3, 2024

BHP projects copper demand to rise by 1 million tons annually, lining pockets with high prices, but will a short-term deficit hurt mining in the long run?

Copper has enjoyed rising prices since 2020, all while miners face rising operating costs and declining ore quality. With new mine construction requiring at minimum a capital-intensive ten-year commitment and existing operations in key copper-producing countries – Latin America, Australia, and Africa – aging, the greater share of financial speculation has focused on buying and selling the commodity itself over investing in exploration vital to future supplies.

The surge in copper price is being driven by its central role in the worldwide adoption of renewable energy technologies, electric vehicles, and grid infrastructure necessary to reach net zero goals, contrasted with falling supply and the beleaguered pipeline of potential brownfield and greenfield projects facing increased challenges.

Mines have to be greener, more efficient, cheaper, and in lockstep with stakeholders.

BHP has issued a report estimating that $250 billion in investment will be required over the next decade to address the widening gap between copper supply and demand.

The report is optimistic, describing copper as a shaper of human history and inextricably linked to the rise of electricity demand.

"Through the 21st century, we expect copper to remain an essential building block to modern life as the world seeks to improve living standards for billions of people, transitions towards a net zero greenhouse gas (GHG) emissions economy, and further digitalises its industries and societies."

A growing need

BHP reports that global copper consumption is projected to increase by an average of one million tons annually until 2035, largely due to the adoption of copper-intensive technologies, doubling the 1.9% growth rate seen leading up to 2021. In 2023, the total copper demand reached 31 million tons, comprising 25 million tons of copper cathode and 6 million tons of copper scrap.

Over the last 75 years, copper experienced a steady compound annual rate of 3.1%.

"Looking ahead to 2035, we anticipate this growth rate to rise again to 2.6% annually," the report reads.

"This will be driven by copper's role in both current and emerging technologies, as well as the world's decarbonization goals," added Ragnar Udd, BHP's chief commercial officer.

The world's largest mining company expects that by 2050, green tech and the energy transition (e.g., renewables and electric vehicles) will represent a 23% jump in copper demand, up from 7%. The ever-growing digital space, which includes the artificial intelligence boom, 5G, smart objects, and blockchain, is projected to account for 6% of copper demand, up from today's 1%.

Pixabay

BHP forecasts that global copper consumption is projected to increase by an average of one million tons annually until 2035, largely due to the adoption of copper-intensive technologies.

"As the energy transition unfolds, we anticipate the roll-out of EVs to lift the transport sector's share of total copper demand from around 11% in 2021, to over 20% by 2040," according to the report.

BHP expects global electricity consumption for data center infrastructure to rise from around 2% of total demand today to 9% by 2050, with copper component and wiring demand increasing six-fold by then.

While demand from China is expected to continue its steady growth, BHP predicts a slower pace, as the country's consumption per capita remains about half that of developed nations. However, India is expected to see demand skyrocket in step with the country's fast-developing urbanization.

"India's electricity consumption per capita currently stands at around one-seventh of Japan's and one-fifth of China's, and we expect its copper demand to grow five-fold over its pre-covid volumes in the coming decades as electricity is made more accessible," the report estimates. "We estimate that the average copper mine grade has decreased by approximately 40% since 1991. We expect between one-third and one-half of global copper supply to face grade decline and aging challenges in the next decade."

The downside

The International Energy Agency (IEA) has emphasized the need for more long-term investment in critical metals projects like new mines, as well as improved recycling, to avoid demand outpacing supply.

While there is a wealth of copper in the world, not all are created equal in the energy transition space. Critical minerals continue to require improved green credentials to meet standards of sustainability, and too great a strain on ally imports and domestic supply could slow down the electrification of transportation and heavy industry, delay net zero objectives, and, at worst, weaken national security and energy infrastructure in the U.S.

"Secure and sustainable access to critical minerals is essential for smooth and affordable clean energy transitions. The world's appetite for technologies such as solar panels, electric cars and batteries is growing fast – but we cannot satisfy it without reliable and expanding supplies of critical minerals," said IEA Executive Director Fatih Birol. "The recent critical mineral investment boom has been encouraging, and the world is in a better position now than it was a few years ago, when we first flagged this issue in our landmark 2021 report on the subject. But this new IEA analysis highlights that there is still much to do to ensure resilient and diversified supply."

"Today's well-supplied market may not be a good guide for the future, with the Outlook noting that demand for critical minerals continues to grow strongly in all IEA scenarios, driven by the deployment of clean energy technologies," IEA's 2024 Outlook emphasizes. "Today's combined market size of key energy transition minerals is set to more than double to $770 billion by 2040 in a pathway to net zero emissions by mid-century."

The IEA's detailed analysis of announced projects claims they stand to meet only 70% of copper and 50% of lithium requirements in 2035 in a scenario in which countries worldwide meet their national climate goals.

As copper is truly part of the electrified fabric of our lives, it is inextricably involved in worldwide economic dynamics; nations may find themselves competing for access to friendly imports amidst efforts to shore up each nation's unique supply chain vulnerabilities.

The strategic importance of friendshoring and securing domestic sourcing and refining capabilities for critical mineral feedstock often captures focus on "new minerals on the block" like lithium, but North American investors and stakeholders are being urged away from taking good old copper for granted in the long term.

 

Reader Comments(0)

 
 
Rendered 11/08/2024 05:08