WTW Mining Risk Review 2023
At least as far back as the early 2000s the pundits in and around the mining industry have been talking about a copper demand explosion, as the emerging middle class in Asia and the global South were predicted to adopt more intensive electricity and electronics at an unprecedented scale. Efficiency in the use of copper, through miniaturisation of electronics and the move from wired to wireless telephony and data transmission, forestalled the expected demand somewhat, despite the rapid urbanisation of China. However, 20 years later a transformational shift in global copper demand looks to be on our doorstep.
In 2023, copper supply is already tight. At the start of this year there were only three days of available copper inventory and production guidance for 2023 has already reduced expected 2023 output by as much as 700,000 tonnes1. As the physical impacts of climate change start to bite, ironically (or perhaps “copperically”) weather is increasingly a factor, restricting supply in the short run and potentially signalling a new supply-side normal.
The increased copper intensity of renewables is only part of the equation. The speed at which the transition needs to happen, to meet 2030 and 2050 commitments around replacement of coal and gas generation capacity and the phasing out of oil for automobiles, means many analysts are predicting the consumption of copper to almost double to around 50 million tonnes per annum by 20352.
Unfortunately, copper supply isn’t keeping up. Copper production from existing mining operations is expected to decline over the remainder of the decade; without replacement projects, the total supply of copper is expected to drop from current levels to around 19.6Mtpa by 2030 from existing operations and those under construction3.
Despite the US Geological survey estimating that there are around 3.5 billion tonnes of discoverable copper out there4, of the 228 deposits discovered between 1990 and 2021, only one was discovered between 2018 and 20215.
Environmental and other sustainability standards are, rightfully, increasing the complexity of obtaining approvals for new mining operations. If all things go smoothly, history shows it takes an average of seven to ten years to bring new operations on-line.
For the energy transition to be successful, the world needs new reliable, sustainable sources of copper. Without a transformation in the supply, the increased demand for copper will drive prices to unsustainable levels, making energy transition infrastructure projects more expensive to execute, causing delays in construction as well as the supply of critical items such as turbines, panels, and storage capacity.
Against this backdrop, diversified global miners such as BHP have already signalled their intention, seeking to acquire the likes of Oz Minerals to access low-cost, long-life operations in low-risk jurisdictions6.
With the supply side of the equation so tight, any incremental demand will have a substantial impact. Copper has long been one of the key metals of industrialisation, with white goods, electrical wiring and electronics all being copper intensive. With the world lifting people out of poverty at record pace, we are continuing to see rapid urbanisation in Asia and the developing world. This means traditional copper baseline copper demand is historically strong, with prices above US$4/lb for much of 2021 — despite the impact of the pandemic — and returning to hover around US$4/lb since January 20237.
What is new is the substantial incremental demand implied by carbon transition forecasts. The transition to renewable energy sources is critical to mitigating climate change and achieving a sustainable future. This shift requires an increased demand for minerals and metals that unlocks our ability to use renewable energy technologies in place of traditional fossil fuel-based energy sources; prime among these is copper. It looks like the world may have a massive copper deficit, just when we need it the most.
In 2022, around 80 million new motor vehicles were produced globally (down from around 89 million in 2019)8. To meet the Paris Agreement Net Zero pathway, limiting warming to 1.5 degrees, it is estimated that:
Estimates put EV sales in 2022 at around 10.5 million globally, up from just 2 million in 2018; this accounts for around 13% of total new vehicle sales. EVs in this context include both plug-in hybrid (PHEV) and battery electric vehicles (BEV) with 73% being BEV10, 11.
Both PHEVs and BEVs require significant amounts of copper; the copper requirement for an electric vehicle is between two and a half to four times the requirement for a traditional internal combustion engine. Wood Mackenzie have estimated that copper demand in the EV segment will increase to almost 10Mtpa by 2040, if the Paris agreement is achieved12 — that’s almost half the total volume of copper produced by all mines in 2022.
Electricity generation and distribution is already the largest consumer of copper, accounting for around 45% of annual copper use13. Renewable generation is more copper intensive than traditional methods, with an increased intensity of copper per megawatt.
A single 3-megawatt wind turbine can contain up to 4.25 tonnes of copper, while a typical solar panel requires around 3-4 kg of copper making copper intensity around 5 tonnes per MW of installed capacity14. Offshore turbines can be more copper intensive due to the additional cabling.
Renewable generation also has the issue of intermittency. This is a problem with a simple solution — install additional capacity and store the excess for use later. Both the additional capacity requirement in terms of generative capacity and storage are similarly copper intensive, so there is definitely a copper hue around the green energy future.
To read more, please download the full article, below.
1 Copper supply is very tight, and any incremental demand matters
2 World copper deficit could hit record demand seen doubling by 2035
3 The role of critical minerals in clean energy transitions - world energy outlook special report
4 Global Undiscovered Copper Resources Estimated at 3.5 Billion Metric Tons
5 Copper discoveries – Declining trend continues
6 BHP Offers To Buy Oz Minerals For $6.5 Billion As Mining Giant Seeks To Boost Clean Energy Assets
7 Trading Economics - Copper
8 Global light vehicle output depressed but forecast to grow in 2022
9 Red metal, green demand - Copper’s critical role in achieving net zero
10 EV Volumes.com
11 Electric Vehicles Look Poised for Slower Sales Growth This Year
12 Red metal, green demand - Copper’s critical role in achieving net zero
13 Copper: Driving the Green Energy Revolution
14 Copper Development Association Inc - Renewables
| Title | File Type | File Size |
|---|---|---|
| Copper: the core of the green revolution | .4 MB |
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