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The Good and the Bad Surrounding Copper


The Good and the Bad Surrounding Copper

The renewable energy push continues. Despite the setbacks the invasion of Ukraine has presented, the world’s major powers are not reassessing their ultimate goal of a completely renewable future at some point. While this might sound fanciful to some, one thing that is rarely discussed is what mineral resources are required to advance this push.

Cobalt, antimony, nickel, silver, lithium, and tungsten are just a handful of minerals used in renewable energy projects. The wind powers the windmill, but the windmill and its components are made up of mined minerals. While the previously mentioned minerals are critical, there is one that trumps them all – copper. Copper is flexible, conducts electricity, and is also recyclable. It is one of the principal materials used in renewable energy systems to produce power from wind, thermal, hydro, and solar energy. 

The Net Zero Coalition is a group of 70-plus countries pledging to arrive at net-zero emissions by 2050. Most of the world’s developed countries are part of this coalition, and while this is somewhat of a moving target, a significant uptick in copper production will be needed to get there. Clean energy transition is highly dependent on copper – much more so than cobalt, antimony, nickel, silver, lithium, and tungsten. According to the S&P Global 2022 special report, “The Future of Copper,” at our current pace global copper demand will double by 2035. In metric tons, that’s going from 25 million metric tons (MMt) to 50 MMt in 13 years. Most industry experts find this unworkable. 

Copper is theorized to exist in abundance, but there have already been cries of “Peak Copper.” In some instances, copper can be substituted by similar conducting metals but those instances are few and far between. For example, aluminum is often substituted for copper when copper’s price surpasses aluminum by 3.5 to 4 times. Yet, for things like undersea cabling and wiring or use in electric vehicles, few substitutes are as efficient as copper. 

Some have posited opening copper mines at a faster rate. To meet the projected demand by 2035, 3 new Tier 1 mines would need to be opened yearly (producing 300,000 metric tons per year) for the next 29 years. If this sounds daunting, it is. Industry experts don’t think it is possible. The International Energy Agency (IEA) revealed in a 2021 study that it takes approximately 16 years to fully develop a mine (from resource discovery to the initial production). This is clearly outside the desired calendar range. 

The good news is copper producers are in hot demand. The bad news is the price of an electric vehicle (EV) will likely continue to climb due to production limitations. 



Copper Prices to Slump in 2022 on Rising Supply

IndexBox has just published a new report: ‘World – Copper – Market Analysis, Forecast, Size, Trends and Insights. Here is a summary of the report’s key findings.

The average annual copper price is forecast to drop by 6% y-o-y to $8,800 per tonne this year. Boosting supply in the global copper ore market is to push prices down, while the global demand languishes with slowed construction activity in China.

According to World Bank’s data and October outlook, the average annual copper price soared by 51% y-o-y to $9,317 per tonne in 2021 but is set to decline approximately to $8,800 per tonne this year, as the global output recovers from the Сovid crisis.

The forecast is shaped by boosting copper ore supply thanks to the launch of the Kamoa-Kakula mine in the Congo, while global demand is reducing with slowed down construction activity in China. The mine owner, Canadian company Ivanhoe Mines, has announced its plans to increase production from 106K tonnes in 2021 to 340K tonnes in 2022.

Global Copper Production

In 2020, the global output of copper fell to 20M tonnes, dropping by -2.3% compared with the previous year’s figure. In value terms, copper production decreased to $136.3B, estimated at export prices.

The country with the largest volume of copper production was Chile (5.7M tonnes), accounting for 28% of total output. Moreover, copper production in Chile exceeded the figures recorded by the second-largest producer, Peru (2.2M tonnes), threefold. The third position in this ranking was occupied by China (1.7M tonnes), with an 8.3% share.

Global Copper Exports

In 2020, approx. 1.7M tonnes of copper were exported worldwide, growing by 16% compared with 2019 figures. In value terms, supplies surged to $11.1B (IndexBox estimates).

Zambia represented the major exporter of copper globally, with the volume of exports amounting to 675K tonnes, which was nearly 40% of total supplies. Chile (283K tonnes) ranks second with a 17% share, followed by Bulgaria (7.1%) and the Democratic Republic of the Congo (5%). Belgium (76K tonnes), Namibia (61K tonnes), Spain (56K tonnes), Slovakia (55K tonnes), South Africa (52K tonnes), Pakistan (38K tonnes), the Philippines (34K tonnes) and South Korea (31K tonnes) were a long way behind the leaders.

In value terms, Zambia ($4.2B) remains the largest copper supplier, comprising 38% of global exports. The second position in the ranking was occupied by Chile ($1.7B), with a 16% share of total supplies. It was followed by Bulgaria, with a 9.4% share.

Source: IndexBox Platform