Rising copper demand could lead to massive shortfall

March 22, 2021

As demand grows, the world might face a shortfall of 4.7 Mt (5.2 million st) of copper by 2030. That shortfall could soar to 10 Mt (11 million st) if no new mines are built.

CRU Group estimates that the copper industry needs to spend upwards of $100 billion to close what could be an annual supply deficit of 4.7 Mt (5.2 million st) by 2030 as the clean power and transport sectors take off. Trafigura Group estimated the 10 Mt (11 million st) deficit if new mines are not found and built.

Bloomberg reported that closing such a gap would require building the equivalent of eight projects the size of BHP Group’s giant Escondida in Chile, the world’s largest copper mine.

If producers fail to address the deficit for copper, prices will keep rising and present a challenge to the Biden administration and other world leaders counting on a worldwide energy transition to fight climate change.

Higher copper prices may lead to more recycling and substitution with cheaper alternatives such as aluminum, which could ease shortfalls.

To be sure, copper projects are in the pipeline. But producers are wary of repeating oversupply mistakes of past cycles by accelerating plans at a time that mines are getting a lot trickier and pricier to build -- one reason why copper prices are near decade highs at above $4 a pound.

“Increasing technical complexity and approval delays could lead to a dearth of shovel-ready projects in 2025-30,” Bloomberg Intelligence analysts Grant Sporre and Andrew Cosgrove wrote in a report.

New projects are being developed that may ease copper deficits between 2022 and 2025, according to the BI analysts. Stronger-for-longer prices should make some costlier projects more profitable, while expansions of existing operations normally mean less onerous approval processes than new sites. Still, there’s also considerable execution risk, the BI analysts wrote, particularly in the 2022-23 period.

Freeport-McMoRan Inc. is developing its underground mine at Grasberg. The ramp-up, which has been slower than expected, is set to be done by year end, easing global supplies that have been disrupted by the pandemic. Behind Grasberg is the Kamoa-Kakula project in the Democratic Republic of Congo. It’s scheduled to come online in July, according to co-owner Ivanhoe Mines Ltd.

Anglo American Plc’s Quellaveco project in Peru may start producing next year as long as community relations don’t sour, as they have done elsewhere from time to time in the South American country.

The ability of producers to meet growing supply demands will also depend on Southern Copper Corp., which wants to tap more of the industry’s biggest reserves to almost double output by 2028.

A chunk of next decade’s new supply could come from the Reko Diq deposit in Pakistan, which has been fraught with political and legal uncertainties, as well as Tampakan in the Philippines.

Companies are having to engage communities and governments much earlier in project development these days given rising social and environmental awareness and expectations. Partly as a result, the average lead time from first discovery to first metal has increased by four years from previous cycles to almost 14 years, according to BI.

“Ironically, a keener focus on the environmental impact of mining activities has left the industry unable to respond quickly to market deficits through new supply, despite the price being well above an incentive price,” Sporre and Cosgrove wrote.

The irony isn’t likely lost on the top brass of the world’s biggest copper producers. Freeport Chief Executive Officer Richard Adkerson told an industry gathering that even if copper soared to $10 a pound tomorrow, it would take his company seven or eight years to get new production to the market.



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