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CERAWeek 2022: Mining executives call for more copper production to meet net-zero goals

10 March 2022 Amena Saiyid

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.


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