Metal markets seem to think copper is the new lithium. A lack of new mining activity has added to worries that there won’t be enough of the red metal for the energy transition, a popular topic at this week’s World Copper Conference in Santiago, Chile.
South America currently dominates copper production and Chile is the largest mined producer. Increasing mine output has proved a challenge, prompting a wave of deal making in the industry and warnings of a serious supply shortfall over the next decade.
Copper is used in wiring and construction as well as electric vehicles, solar panels and other green technologies. Electrification is expected to increase annual copper demand to 36.6 million metric tons by 2031, with supply forecast to be around 30.1 million tons, creating a 6.5 million ton shortfall at the start of the next decade, according to consulting firm McKinsey & Co.
In 2021, refined copper demand stood at 25.3 million tons, according to the International Copper Study Group.
“The market overall is pretty tight,” said Robert Edwards, copper analyst at CRU. “Longer term there’s a narrative around resource scarcity and the green transition with EVs and renewables as well as the build-out of electricity grids. On paper it’s quite a substantial supply gap opening up over the next 10 years,” he added.
However, “there’s no slack in the system, no buffer,” said Marex’s head of market analytics Guy Wolf at a recent conference in Switzerland. He said that copper was the only metal with locked-in demand growth, but indicated prices would need to rise to $15,000 a metric ton to attract investment in new mines. Futures on the London Metal Exchange are around $9,000 a ton.
Copper miners have been at the center of a recent spurt of deal making.
PLC recently offered $23 billion for Canadian miner Teck Resources Ltd., potentially creating the third-largest copper producer in the…
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