Copper futures broke above USD7,000 per tonne on Wednesday, October 21 and continued its upward momentum – its highest level since June 15, 2018. This was supported mostly by stronger demand from China and worries about supply disruptions in Chile. After months of underperforming, the Chinese economy is gathering momentum with industrial production increasing by 6.9% year-on-year in September 2020, the most since December 2019, touting the red metal’s green credentials as bullish for future demand.
According to the Copper Alliance, a network of regional copper centres and their industry-leading members, copper demand is growing. In fact it is expected to jump by as much as 50% over the next 20 years alone, and this growth is part of a wider trend. As the World Bank’s 2017 report ‘The Growing Role of Minerals and Metals for a Low Carbon Future,’ points out, we could see a ten-fold rise in demand for metals, including copper, by 2050 as the world moves toward a low carbon energy future.
In addition, driven by the two themes of digitalisation and green technologies, the Covid-19 economic recovery packages have accelerated the arrival of the new age of copper. Stemming from green infrastructure development, the widespread adoption of electric vehicles and the long-anticipated roll out of 5G, a future copper boom offers producing countries a window of opportunity to harness greater benefits from their resources.
Governments around the world have launched economic recovery packages in response to the recession brought on by the pandemic. Two key themes feature prominently: investments in digitalisation and green technologies. Both China and the EU have established reactivation plans supporting 5G telecommunications networks, big data, and artificial intelligence (Meinhardt 2020, European Council 2020). The EU has further committed its recovery to moving the region towards carbon neutrality by 2050, proposing a massive expansion of the electric car market and related charging infrastructure (European Commission 2020). These demand drivers are expected to accelerate the arrival of the age of copper.
Analysts estimate that more than USD1-trillion of investment will be needed in key energy transition metals (aluminium, cobalt, copper, nickel and lithium) over the next 15 years, just to meet the growing demands of decarbonisation. This is almost double the figure invested over the previous 15 years. One can argue about both the scale and the energy transition, but the criticality of metals to its realisation is without question. Put simply, the energy transition starts and ends with metals. To generate, transmit or store low or no-carbon energy, one needs aluminium, cobalt, copper, nickel and lithium. There is simply no getting away
Copper is the third most widely used metal in the world. Chile accounts for over one third of world’s copper production followed by China, Peru, United States, Australia, Indonesia, Zambia, Canada and Poland. The biggest importers of copper are China, Japan, India, South Korea and Germany.
A conductor of both heat and electricity, the red metal is a key input for global manufacturing, electrical equipment, industrial machinery, and construction. China’s post-pandemic rebound has already translated into higher orders. In June 2020, China recorded the highest ever monthly imports of copper (Reuters 2020). This rise in demand is thanks in part to copper’s central role in the digital and green economy of the future. Clean energy is the fastest growing segment to support electrification, with solar panels and wind turbines requiring some 12 times more copper than previous generation methods (Copper Development Association 2020).
Producers are becoming increasingly carbon conscious, with many setting targets for net-zero carbon. Several high-profile majors have offloaded their high-carbon assets and/or acquired low carbon replacements. It isn’t just about portfolio balance. The green agenda will have a profound impact on the way these companies extract and refine metals, with lower carbon operations an increasing priority.
But is there enough copper to meet this growing demand? Currently global copper reserves are estimated at 830 million tonnes (US Geological Survey [USGS], 2019), and annual copper demand is 28 million tonnes. Furthermore, according to USGS data, since 1950 there has always been, on average, 40 years of copper reserves available and over 200 years of resources, which include reserves, discovered and potentially profitable deposits and undiscovered deposits predicted based on preliminary geological surveys. These copper resources total 500 million tonnes (USGS, 2014 & 2017). In addition to the known reserves, it is worth noting that 35% of demand is met with recycled copper, significantly reducing the need for mined copper.
Recycling and the circular economy must be considered when talking about meeting future copper demand. Copper is currently recycled at significant rates. ICSG estimates that, on average, 35% of global copper use came from recycled copper. By its nature, copper is a circular material as it does not lose quality when it is reused for another function. Not only will recycling more copper help to meet demand, but it will also make the industry even more sustainable and conserve more of the planet’s natural resources.
While the copper industry’s significant recycling rate and potential for even more recycling are impressive, recycling alone will not be enough to meet demand and ensure a stable supply of copper. Continued mining for new copper will be needed. The solution to meeting the growing demand sustainably is a combination of the two, an efficient and sustainable mining framework with proper environmental standards and high recycling rates to get the most out of the copper currently on the market.
So, the data is clear. There is enough copper to meet current, and future, demand—even taking into consideration the expected growth in demand for copper in the coming years. While this shows copper will be there to enable more renewables and EVs, using copper to meet this demand needs to be done smartly and efficiently. To make sure this is the case, investment by industry will be required, as will political certainty and stability.
The copper industry is already investing significantly in innovation and sustainable solutions. For example, on average, the members of the Copper Alliance invest a combined USD20-billion a year to improve their contribution to sustainable development in areas such as protecting the environment and ensuring the safety of their operations. This alone, however, is not enough. Although it is true that industry can, and should, do more to ensure copper is extracted, used and recycled in a sustainable way, there also needs to be political stability and a regulatory environment favourable for such investment.
