Copper rush

8th April 2024
-IAM, News

Hugues Chevalier, Economist

According to the International Energy Agency (IEA), demand for copper is set to rise by 40% over the next 15 years, to more than 30 million tonnes a year, which could cause the price of this metal to skyrocket. All this while, according to econometric models, demand is set to exceed production within the next two years. Shortages could therefore occur over the next few years, as investment is insufficient to meet future demand. Reserves are estimated to be sufficient at around 900 million tonnes, but the question is whether the mining sector will be able to extract enough copper to meet this growing demand. According to the IEA, an additional 80 mines would have to come on stream to meet the increase in consumption. The energy transition and the decarbonisation of the economy are behind this explosion. Copper is a key element in the production of renewable electricity, such as wind power and photovoltaics. Without copper, there would be no renewable energy. In the automotive sector, the switch to electric motors is generating a 400% increase in demand. While a vehicle with an internal combustion engine requires around twenty kilos of this metal, a vehicle with an electric motor requires up to 100 kilos. The explosion in demand has also led to a profound upheaval in production and a spate of takeovers. China, which consumes nearly 60% of the world’s production, is buying up mines through China Minmetals. The latter has just taken control of the largest reserves in Africa (Botswana). But the other industrial metals majors are not standing still. BHP bought OZ Minerals in May 2023 for more than $6 billion, and Newmont took control of Newcrest for $19 billion last November. But the development of new copper mines is attracting strong opposition because of their environmental impact, particularly with the discharge of hundreds of millions of litres of sludge polluted with heavy metals and a huge need for water. However, in the event of a severe shortage of copper, in some cases it could be replaced by aluminium…which could lead to a new rush.