Commodities | Aug 24 2022
A recent study projects a large copper deficit is looming, hampering the world's intention to progress towards a Zero-Net Emissions economy by 2050.
-Copper is essential for plans to reform economies towards net zero emissions by 2050
-Current projections imply supply won't be able to keep up with growing demand for copper
-There's no physical resource scarcity; the challenge is to get sufficient quantities out of the ground
By Richard Acello
An anticipated shortage of copper, the metal of electrification, may scuttle plans of governments to reach Net-Zero Net Emissions by 2050.
The warning featured prominently in a recent report by IHS Markit “The Future of Copper: Will the Looming Supply Gap Short circuit the Energy Transition?” and has been released by the researcher’s current owner, S&P Global.
The researcher's key prediction is substitution of other metals in place of copper and recycling will not be enough to meet the demands of electric vehicles (EVs), power infrastructure, and renewable generation.
Barring a “massive new supply” of copper, the goal of Net-Zero Emissions by 2050 will likely be short-circuited and remain out of reach, the report concludes.
Technologies critical to the energy transition such as electric vehicles (EVs), charging infrastructure, solar photovoltaics (PV), wind, and batteries require much more copper than their fossil fuel-based counterparts.
The report predicts large-scale deployment of these technologies globally, and especially EV fleets, “will generate a huge surge in copper demand. Major investments in the power grid to support electrification will further amplify the trend.”
As a result, copper demand is projected to double from 25m metric tons (MMt) today to about 50 MMt by 2035, a record-high level that is projected to reach 53 MMt by 2050.
The copper gap is anticipated to open up by 2025, and will have “serious consequences across the global economy.”
The shortage is projected to reach -9.9MMt by 2035, assuming a continuation of current trends in utilisation of mines and recycling of recovered copper.
The anticipate market dynamic equals a -20% shortfall from the supply required for the 2050 Net-Zero Emissions target.
But even if copper mining is increased aggressively and recycling reaches all-time highs, demand will still outstrip supply in the run up to 2035, suggest the analysts.
The prediction is the copper gap “may emerge as a key destabilizing threat to international security,” because annual shortfalls will place “unprecedented strain” on supply chains.
The scramble for electrification is compared to the 20th- century thirst for oil, but worse because of an “even higher geographic concentration for copper resources and the downstream industry to refine it into products.”
What about substitution?
If copper is in short supply, can some other metal be used?
Yes, but in the long run substitution probably doesn’t make that much of a difference, according to John Mothersole, director, non-ferrous metals, S&P Global Market Intelligence.
“Improved efficiency in the use of copper, including the substitution of copper by other metals such as aluminum, was factored into the projections for demand,” Mothersole assures.
Limiting factors in the substitution of copper include conductivity and space, energy efficiency, corrosion and fire resistance, maintenance, and the CO2 emissions of alternative metals.
“All told, we believe these factors will reduce copper consumption by more than 400,000 metric tons per year over the next five years or something on the order of about 1% of total demand.”
As far as increasing the supply of copper, Mothersole says even under very optimistic supply assumptions, the copper market will record deficits larger than any ever registered.
“The market would act to reconcile this mismatch between supply and demand through high prices,” he explains.
“High prices would, of course restrain demand, in part through substitution, though a major consequence would be to slow energy transition.”
High prices would in turn stimulate exploration, but not overnight because “lengthening lead times for new mines, now as long as 16 years, has been a problem long identified by the industry and is central to the looming supply challenge.”
Identifying more environmentally friendly extraction technologies would reduce opposition to new mines and lessen opposition to the expansion of existing mines, Mothersole suggests.
Clearer, predictable policies around permitting would also help “address some of the social license and political issues that create delays and inhibit investment.”
In addition, “a better understanding of the interdependencies of energy transition will be important in ensuring that the path forward is not blocked by similar issues regarding other critical minerals.”
Plenty Of Metal, Underground
How much copper is potentially available?
“The first thing to note is that globally, there is no physical resource scarcity,” Mothersole explains.
“Research indicates that the reserve base of proven and geologically inferred reserves may amount to more than five billion metric tons versus current worldwide use of approximately 25 million metric tons. The question is whether this resource can be developed in a timely fashion to meet the 2050 Net-Zero emissions goal.”
Australia, Chile, the US, and Russia have been identified as countries with significant copper reserves.
FNArena reached out to environmental organisations for their take on the looming copper shortage and whether they will be supportive of increased copper production to further Net-Zero Emission goals.
Neither the Sierra Club, the Environmental Defense Fund, or Friends of the Earth responded to email inquiries.
In Nevada, environmentalists are banding together to scuttle mining of one of the world’s largest deposits of lithium, which like copper, is considered an important element in the transition to clean energy.
According to Inside Climate News, plans to dig for lithium “have encountered a surge of resistance from tribes, ranchers, residents and activists who say they believe the repercussions of the mine will outweigh the lithium’s contributions to the nation’s transition to less-polluting energy sources than fossil fuels.”
In the meantime, the price of copper is being watched as a bellwether in predicting a possible recession, which has injected a lot of volatility in futures trading with the price of copper falling sharply since May this year.
On July 15, the price of copper slipped below US$7,000/tonne for the first time in two years. It has since recovered to closer to US$8000/t, still well down from prices above US$10,000/t earlier in the calendar year.
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