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Mining executives agreed that more copper is needed if countries
pursue their net-zero carbon plans as aggressively as they have
indicated during a 9 March panel discussion at the S&P Global
CERAWeek conference in Houston.
Copper is the third most consumed industrial metal and is
indispensable for electrification. It is the fundamental building
block for wind turbines, solar panels, electric vehicles (EVs), and
EV charging stations because of its durability, high conductivity,
and efficiency.
Describing copper as "the oxygen of decarbonization," Rio Tinto
Copper CEO Bold Bataar warned of a "massive deficit" in copper that
the world will face after 2025. He said the limited number of big
mines coming online in the next 18-24 months will not meet the
demand for this metal.
However, S&P Global Commodity Insights projects the copper
supply-demand picture will essentially remain flat in 2022, but
that the gap will widen. In 2026, 30,021 mt of copper is projected
to come online versus a demand of 30,161 mt.
No decarbonization without copper
"Without copper, there is no decarbonization because it spans
all renewable energy sectors," said Bataar. Rio Tinto is the
world's second-largest metals mining company.
For decarbonization, "you will need a lot of copper and discover
it is not there," and there aren't enough projects in the pipeline
to meet that burgeoning demand, said Julien Rolland, who heads
power and renewables at Singapore-based commodity trading company
Trafigura.
Bataar, Rolland, and Richard Adkerson, the CEO of US miner
Freeport-McMorRan, joined S&P Global Vice Chairman Daniel
Yergin to discuss the challenges of producing enough copper to meet
the demand generated by a global transition from fossil fuels to
electrification.
"Any form of investment in carbon reduction is highly
copper-intensive ... that is bringing a whole new element of copper
demand," said Adkerson. Depending on how quickly the countries
fulfill their aspirations to electrify, "this is a huge new element
of demand that's coming to the market that will have very severe
supply constraints," he added.
Bataar noted that solar and wind power are two-to-four times
more copper intensive than thermal power generation, while EVs
require at least four-to-six times more copper than EVs.
"There no dispute about copper demand," Bataar said.
Finding and matching right quality of resource
The key challenge for mining companies is to find and develop
the right quality of resource to meet this demand.
Unlike iron, hunting for copper deposits is like "looking for a
needle in a haystack" because the resource is available in the
earth's crust at the confluence of tectonic plates.
As Russia is among the top ten global producers of copper,
Bataar said the sanctions following the war in Ukraine have further
constrained the copper market, which already was operating in a
deficit.
Rolland said people are extremely worried and are "rushing" to
buy supplies quickly and stock up their inventories.
With copper inventories at historic lows, Adkerson said
companies like Freeport-McMoRan are actively exploring for this
resource globally. The top ten mines in the world have been
operating for at least 100 years, and these include
Freeport-McMoran's three mines, Adkerson said.
According to Bataar, a copper mine takes between 10 and 15 years
on average to develop.
Environmental, community concerns
Trying to develop a "greenfield" copper mine is challenging
because of its "huge impact" on the environment and surrounding
communities, Adkerson said.
Freeport-McMoRan currently produces about four billion pounds of
copper a year at a cost of $1.30 a pound that is selling for about
$460 today, according to Adkerson.
"It's not a question of profitability and resources. There are
physical limitations on how to respond to this," he said.
Looking ahead, he sees greater emphasis on recycling scraps of
copper to respond to this shortage.
S&P Global is readying a white paper for release by the end
of April that will discuss the supply constraints in the global
copper market in light of decarbonization goals and the slow pace
of production, said Yergin. The paper will focus on the demand for
copper as more countries set aggressive goals for EVs.
--S&P Global EMEA Metals Editor Jacqueline Holman
contributed to this article
Posted 10 March 2022 by Amena Saiyid, Senior Climate and Energy Research Analyst
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
