The price of copper has reached new record highs due to supply constraints. And while the Energy Information Agency expects global copper production to reach an all time high later this decade, they also warn that by 2035 the world will be in a whopping 10 million ton shortfall. Australian mining giant BHP also estimates that the world will produce 15% less copper in 2035 than it does today, as copper discoveries grind to a screeching halt and existing mines deplete. The signs of an imminent peak and decline in copper production could not be any clearer.
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Insatiable demand
The price of copper has reached new record highs this weak, exceeding $11,600 per ton on the London Metal Exchange (LME) on Friday. Ostensibly this was due to a large withdrawal of the metal from LME warehouses earlier this week, but if you look at the long term trend, there is clearly much more at play here. The price of copper is trending upwards for decades now. Global financial giant UBS has just raised its price forecasts aggressively, predicting that copper will cost $13,000 per ton by December 2026. What is going on here?
Simply put, we are on a collision course between tightening global copper supply and demand fueled by electrification and most recently: AI data centers. Copper is an essential component in everything electric due to it’s high heat and electrical conductivity, surpassed only by silver. Copper wires can be found in everything from power generation, transmission, and distribution systems to electronics circuitry, telecommunications, and numerous types of electrical equipment—consuming half of all mined copper. The red metal and its alloys are also vitally important in water storage and treatment facilities—as well as in plumbing and piping—as it kills fungi, viruses and bacteria upon contact and conducts heat very efficiently. Thanks to its corrosion resistance and biostatic characteristics, copper is also widely used in marine applications and construction, as well as for coinage.
Growth in copper demand thus comes from both ‘traditional’ economic growth—especially in the Global South—and the energy supply addition from “renewables”. (Not to mention the extra demand from EV-s and data centers, or energy efficiency and conservation measures, such as smart grids, LED lighting, and heat pumps.) Problem is, that the generation and transmission of low carbon electricity requires more copper per megawatt than conventional fossil fuel power plants. Offshore wind farms, for example, take around 11 tonnes of copper per megawatt to build—that is over 5 times as much as gas-fired power plants. Onshore wind and solar are also more copper-intensive, at around 1.7 and 1.4 times, respectively. In addition, the capacity factors of wind and solar power are also much-much lower than fossil power. This means that we need to install 5-10 times more renewable power capacity, just to generate the same amount of electricity we used to do with natural gas or coal. Together with the necessary grid extensions, batteries, transmission lines, transformers etc. the copper demand raised by “renewables” will grow orders of magnitude greater than that of traditional, but highly polluting fossil fuel generation.
On the traditional economic growth front, demand can also be expected to grow dramatically. Perhaps it comes as no surprise, that China continues to be the world’s largest consumer of copper with its massive industrial output—accounting for nearly 60% of global copper consumption, and dwarfing the US in the second place at 6%. Looking ahead, though, India can be expected to rapidly overtake the United States to become the third-largest source of refined copper demand, with Viet Nam also emerging as a major contender for copper. Industrialization, infrastructure development, population expansion, urbanization and relocating plants out of China are all driving forces for the growth in refined copper consumption in these regions. So, even as China’s economy matures and Western industries decline, there are a number of nations with an insatiable demand to take up the slack. No wonder UBS expects global copper demand to grow by 2.8% annually through 2026 and beyond. Australian mining giant BHP’s estimates are not much smaller either:
“Putting all these levers together, we project global copper demand to grow by around 70% to over 50 Mt per annum by 2050 – an average growth rate of 2% per year.”
Infinite growth on a finite planet
Problem is, copper doesn’t grow on trees. It can only be found in certain geological formations, taking millions of years to form. In other words: it’s a finite, non-renewable resource. Humans have used copper for over 11,000 years, and as usual we went after the easiest to find and extract deposits first. Naturally, when all you have is a pickax and basket, you don’t start to build large open pit mines. Our ancestors thus went after copper nuggets found in riverbeds first, collecting lumps with 35% copper content, or perhaps climbed a little uphill and hammered away rocks with a still considerable amount of metal in them. Then, only when these resources were depleted, have they started to dig caves and build underground mines, following thin seams of copper in the rock.
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