After hitting near all-time highs earlier in 2022, copper prices have returned to normal. Despite the good news, does a more volatile copper market set the stage for problems down the line?
Not long ago, U.S. copper was sniffing $5. Copper prices are more stable today, but experts say we could face supply issues in coming years.
There are several reasons why a global copper shortage could happen. Surprisingly, not all of them have to do with copper production. Spurred on by more renewable energy initiatives, including the rise of electric cars, the copper industry is moving closer to long-term demand bottlenecks.
From sunup to sundown, we’re never far from a product that uses copper.
Unfortunately, as the United States and the rest of the world transition to clean energy production, the run on copper will intensify. We use copper in everything from solar panels and photovoltaic (PV) wire to transformer coils and conductors on wind farms – not to mention, it’s in every electric car.
Countries around the globe, including the United States and the European Union, have Net-Zero Emission projects on their to-do list. Often, the end date for these initiatives is 2050. Green technology is fantastic for the environment and weans us off fossil fuels but also forces demand for copper without an established production plan.
In 2021, global copper production hit 21 million metric tonnes (MMt) – and is projected to grow slightly to about 21.84MMt this year. More production is always good news, but the industry needs to see drastic increases to hit the estimated 53 million metric tonnes needed in 2050.
But isn’t 2050 nearly 30 years away? Yes, but it takes time to scale copper mining production. Copper demand isn’t going to sit still as companies invest the necessary time, money, and labor to develop new technology, open more mines, and chase down deposits. In a recent report by S&P Global, worldwide market demand will hover around 49MMt by 2035 – more than double what we produced in 2021.
Copper is a base metal, so it should be plentiful – right? It is, but there are limitations. The number of products that rely on a steady copper supply is astounding. From coffee makers and electric vehicles to smartphones, electrical wire, motor parts, and jewelry, there is no shortage of industries that rely on the refined copper market for survival.
According to the United States Geological Survey, the world has produced about 700 million Metric tonnes of copper. It may seem like a massive amount of metal, but it doesn’t compare to what’s still in the ground.
The USGS believes there is an estimated 2.1BMt (yes, billion with a B) worth of discovered copper deposits, meaning we know copper is there. Besides that, the agency says another estimated 3.5BMt of copper is still undiscovered under the Earth’s crust.
If we’ve barely scratched the surface on our alleged copper stores, why aren’t we extracting as much of the metal as possible?
The answer is complicated.
In the cases where we know where the copper is, it often comes with an expensive barrier to entry.
Environmentally speaking, getting copper ore from the Earth is not easy. Copper mines use open-pit mining to dig stepped levels deeper and deeper into the ground, taking up a lot of space and causing ecological eyesores. Additionally, countries have different laws governing water, waste, and potential issues like deforestation.
Stricter laws and heftier fines could prevent new projects from starting or current ones from expanding. All in all, the very environment we’re working to save may, in the short term, have a chilling effect on copper producers.
Sometimes technology also needs an opportunity to catch up. Technological advances could improve how copper is mined and make the process more cost-effective and safer for the environment. S&P Global highlighted several examples in their study, including:
Innovation typically relies on two factors to be successful – time and money. Scaling up new processes takes a behemoth capital investment and years to implement but could cover any lost upfront costs.
Except for wire rods and copper wire, up to 60% of copper sources for domestic copper and brass mills came from recycled materials, including electrical wiring, plumbing pipes and fittings, machine scraps, and other items at the end of their usable lifespans. This process currently helps the U.S. meet about one-third of its demand.
Copper is unique in that it can be recycled multiple times without showing any signs of degradation. Even better, because the recycling process is less intensive than mining and refining new materials, recycled copper is an environmentally friendly option for meeting demand. Some estimates suggest two-thirds of products produced in the last 100 years with the metal are still in use today.
While the world weans off fossil fuels and begins heralding a new, greener future, copper demand is projected to soar.
The simplest solution is to mine more copper. Sure, it’s an easy solution, but even if a company meets every environmental and technological challenge, opening a mine takes a really long time.
Determining whether a site has enough copper ore to make the investment worth it can take anywhere from 2-8 years. Opening the mine for operations can take another 4-12 years.
This timeframe also doesn’t account for the millions upon millions of dollars needed to perform research, testing, site acquisition, building, and staffing. If a project started the discovery process today, it likely wouldn’t even be operational until 2030, if not years later.
Meanwhile, current mines are facing dwindling supplies of easy-to-access copper ore. This means they either have to dig deeper or find new ways of processing the ore into usable materials. Excavation is one solution, but it means more investment and it will still take time for production to ramp up. Not to mention, labor issues make it hard to expand mining pits, and digging may potentially cause more environmental concerns.
As the saying goes, “necessity is the mother of invention.”
Demand for copper won’t decrease, but there are ways to meet the need as it comes along. New, innovative extraction methods can release copper ore without using lots of water or polluting the ground, water sources, and air with chemicals. Increased recycling beyond what we’re doing now may be able to help stem the flow as well.
Other issues may be harder to diagnose and address, including labor shortages and unrest in some of the world’s largest copper-producing countries. For example, workers in Chile, the world’s largest copper producer, went on strike following the closure of one of the country’s foundries, which had been the subject of several health concerns. Though the strike ended quickly, it highlighted health, safety, investment, and environmental concerns.
The plan to increase copper production needs to occur on two fronts. There should be more investment in better technology, extraction methods, and recycling processes that help us get the most out of what we have.
We also must be mindful of how increased production will impact environmental health. We can address climate change concerns and pull away from fossil fuels eventually. It just might require a few real-time adjustments to make it work.
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