JP Morgan says the emerging demand sector will not “reach a critical inflection point until the second half of the decade. Green transition application of copper will rise from 1.4 million tonnes in 2020 to 2.6 million tonnes in 2025 and 4.5 million tonnes in 2030.”
A new International Energy Agency report says global copper demand could well double by 2040. But this is to happen against the background of only a few major copper mines in development. For a very long time, circular economy is being widely practised in the copper industry by way of recycling of scrap. But whatever be the volume of recycling, it could only supplement supplies in large volumes from smelters processing concentrate.
Not only is the pipeline of virgin mines development projects lean, but supplies from operating mines in Chile and Peru that together account for around 35% of global mine production are yet to recover from Covid-19 and weather-related dislocations.
To further add to ore supply problem, workers at BHP Billiton’s Escondida and Spence mines in Chile have struck work. When copper concentrate supplies are under pressure, treatment and refining charges (TC & RC), the source of income for standalone smelters, fall. In fact, the prevailing TC & RC is at a decadal low.
An electric vehicle will need 84 kg of copper against 23 kg for an internal combustion engine. A single-wind turbine will require 3,629 kg. As of now, a consensus is not there as to how much copper will be needed as the world embraces green technology.
China is currently the largest producer of the red metal, but it also uses well over half the global copper output. Besides its own production, in the first four months up to April this year, China’s imports of unrefined copper and related commodities were up by 9.8% year-on-year.
Considering the long gestation period for development of new mines – it takes nothing less than five years to open a new mine – the world could be facing a copper supply gap of 8.2 million tonnes by 2030.
Copper, therefore, is a good long-term bet.