Copper Supply Concerns Heightened Amid Growing Demand and Industry Challenges
The global copper industry is facing significant challenges as supply struggles to keep up with surging demand, according to industry experts at the Rule Symposium on Natural Resource Investing held July 7-11 in Boca Raton, Florida. South32's Sierra Gorda copper mining joint venture in Chile and other major producers are sounding alarms about potential shortages and rising electricity consumption.
Projections by S&P Global Market Intelligence indicate that global refined copper demand is set to increase by 14.2%, reaching 30.7 million metric tons (MMt) by 2028. However, the anticipated supply shortfalls could reach up to 1.6 MMt by 2035, driven by insufficient prices to encourage new supplies.
Robert Friedland, founder and executive co-chairman of Ivanhoe Mines Ltd. and executive chairman of Ivanhoe Electric Inc., highlighted the looming disconnect between decarbonization goals and the reality of material needs. "Eventually, copper will get so expensive that there'll have to be either cutbacks in consumption or shifts to alternative materials," he said.
Rising global electricity demand, driven by improving access and expanding datacenters, is expected to be a significant driver of copper demand. Friedland noted that air-conditioning demand in developing regions alone requires vast amounts of copper, not just in the units themselves but also for electricity generation and transmission.
Hayden Locke, president and CEO of Marimaca Copper Corp., underscored the urgency of investing in transmission and distribution infrastructure to meet the upcoming surge in electricity demand. "It is a ridiculous amount of demand that is coming over the next 20 years," Locke said.
Impact of Wartime Demand
Current global conflicts, particularly the Russia-Ukraine war, are also influencing copper markets. Friedland pointed out that modern warfare, which increasingly relies on AI and advanced electronics, significantly boosts copper demand. "Military necessity for these metals puts an infinite value on it for national security," he stated.
Despite growing awareness of the need for increased copper production, several obstacles remain. Exploration budgets are not keeping pace with demand, and the time required to bring new mines online has increased. Brent Cook, founder and senior advisor at Exploration Insights, noted that exploration spending, while recovering from a 15-year low, is still below its 2012 peak.
Additionally, low ore grades in new deposits further complicate production efforts. Christian Easterday, managing director and CEO of Hot Chili Ltd., emphasized that the industry must adapt to lower grade profiles as the new normal.
Permitting processes also pose significant hurdles. "Permitting is absolutely key; it's what's holding back new mine developments around the world," Easterday said.
Price Pressures
Speakers at the symposium agreed that copper prices would need to rise substantially to incentivize new projects. While current prices are not at the peak levels seen in 2021, they remain high, and future projections suggest they will need to increase further to meet demand.
Hayden Locke concluded that a significant price hike is necessary to bring new projects online. "There are very few new copper projects that can be brought into production without a significantly higher copper price," he said.
