The demand for primary copper is set to grow by an average of around 2% per year over the next 20 years. That represents an incremental rise of around 9 million tonnes over the period. However, Wood Mackenzie estimates an annual demand growth in copper to 3.5% per year. This scenario would double global primary demand by 2040, equivalent to an additional 10 million tonnes.
Mine closures is an ongoing feature of the copper industry. Without additional investment in supply this will lead to decline in output.
Currently, the industry has committed around $120 billion in capex to expand production to offset the impact of grade decline and depletions. However, without additional substantial investment, production will decline from 2024 onwards, Mackenzie report says. “Coupled with demand growth, this decline in output will lead to a theoretical shortfall of around 16 million tonnes by 2040.
Plugging that gap would require an additional investment of around $ 325 billion. The copper industry is just not investing enough to meet burgeoning requirements. “It’s all well and good governments stimulating the demand side of the equation through policy, and miners talking up the same, but where is the investment in supply?” Wood Mackenzie asks.
Copper will play a pivotal role in the energy transition. Aluminium may be an abundant and cheap competitor for electrification applications, but carbon footprint issues for primary metal may give copper the edge. Both will experience rapid growth in power generation, transmission, distribution, storage and motive uses. Put simply, the energy transition cannot happen without sufficient, timely and ESG-compliant copper and aluminium supply in place.
So, how can the industry tackle this looming challenge? Greater availability and use of scrap metal is part of the solution. However, addressing the challenges involved would require a massive policy shift and/or societal change, neither of which would deliver quick results. Without decisive action, the lack of supply development really could come back to bite the copper industry, Wood Mackenzie concludes.