An excerpt from an article by Richard Mills…. Copper
Copper is one of the most important metals with more than 20 million tonnes consumed each year across a variety of industries, including building construction (wiring & piping,) power generation/ transmission, and electronic product manufacturing.
In recent years, the global transition towards clean energy has stretched the need for the tawny-colored metal even further.
Simply put, electrification doesn’t happen without copper, the heartbeat of the global energy economy.
Along with the usual applications in construction wiring and plumbing, transportation, power transmission and communications, there is now an added demand for copper in electric vehicles and renewable energy systems.
Millions of feet of copper wiring will be required for strengthening the world’s power grids, and hundreds of thousands of tonnes more are needed to build wind and solar farms. Electric vehicles use triple the amount of copper as gasoline-powered cars. There is more than 180 kg of copper in the average home.
However, some of the world’s largest mining companies, market analysis firms and banks, are warning that by 2025, a massive shortfall will emerge for copper, which is now the world’s most critical metal due to its essential role in the green economy.
The deficit will be so large, The Financial Post stated last September, that it could itself hold back global growth, stoke inflation by raising manufacturing costs and throw global climate goals off course.
How big are we talking? Well, the speed at which copper demand outpaces supply will depend on the successful meeting of net-zero emission goals. According to a 2022 study by S&P Global, these goals will double the demand for copper to 50 million tonnes annually by 2035. Only about 20 million tonnes of copper per year is currently mined.
BloombergNEF predicts demand will increase by more than 50% from 2022 to 2040.
If Europe meets its goal of 30 million electric cars by 2030, the amount of copper required @ 85 kg per EV, is 2,550,000,000 kg, or 2,550,000 tonnes. This is nearly double US copper production in 2022 of 1,300,000 tonnes, or almost half of Chile’s annual production.
S&P Global Mobility forecasts 28.3 million EVs in the US by 2030. That’s 28,300,000 x 85 kg per EV.
Remember we are only talking about copper demand for electric vehicles sold in the US and Europe — we aren’t counting higher EV sales in other countries, along with millions more public and private charging stations to service them, all needing copper, plus supplying all the other copper markets, for construction, power transmission, telecommunications, etc.
This equates to nearly five Escondida mines (the largest in the world), with each producing 1 million tonnes per year. Just to provide enough copper for EVs in the United States and Europe. And not including charging stations, which add another nearly 10,000 tonnes combined.
Even more, copper will be required for wind power, energy storage and electricity transmission.
(most copper production, for the foreseeable future, is slated to come from just 5 mines, all 5 of these mines have offtake agreements in place with Asian buyers, meaning that a large majority of new copper ore will not flow to Western markets to offset the coming copper supply deficit.)
A recent development in China bodes well for the upstream copper market. To ensure self-sufficiency, the country is expanding its network of copper smelters, meaning it will import more copper ore than refined copper, for processing domestically. According to CRU, China will account for about 45% of global refined copper output this year.
China’s copper smelting capacity is expected to increase 45% by 2027, turning China into a net copper exporter by 2025 or ‘26. With so many smelters requiring copper concentrate, the market for concentrate is tightening. According to Bloomberg,
The treatment charges that miners pay smelters to process ore drops when concentrate is scarce. That dynamic is likely to be reflected in a fall in fees for next year to $84 a ton from $88, according to an estimate from Shanghai Metals Market.
Peak metal
Gold, silver and copper all have supply challenges in common that suggest each has reached a peak level of mine production. For gold and silver, the mining industry is currently unable to mine enough to meet annual demand, without recycling.
The case for peak gold, silver and copper
As for copper, we are quickly approaching the lower limits of cut-off grades, meaning that we are almost at the point where reserves cannot be grown at all. In other words, peak copper.
The copper industry is in the grips of a structural supply deficit that, combined with inflationary cost pressures and resource nationalism in some of the world’s largest copper producers, is only expected to get worse.
Global shortages of the metal could reach 8 million tonnes by 2032, as soaring demand fails to be matched by new copper mines. The rate of supply increases required, is equivalent to building eight copper mines the size of Escondida, the largest in the world, per year, for the next eight years. That’s insane.
When you combine the expected deficits for these three metals with increasing industrial demand for copper and silver (due to the greening of the world economy) and higher investment demand for silver and gold, once the Federal Reserve realizes it can’t raise interest rates any more without breaking the Treasury, causing the US dollar to slide, the prices of gold, silver and copper are all but guaranteed to go up.