Copper: demand beats supply?
Energodigest | 27 October 2022
Switching from fossil fuels to renewable energy is not as easy as it may appear. The global market for copper, a critical component for the energy transition, is already struggling to bridge the gap between supply and demand, which may widen even further in the coming years.
According to the World Bureau of Metal Statistics, the refined copper market this August was short of 170,100 tonnes vs. 60,700 tonnes last August, while over the first eight months of this year the deficit has reached 657,000 tonnes, compared with 283,000 tonnes in the whole of 2021 (see Fig. 1). To add insult to injury, LME copper stocks are now rather low (see Fig. 2). While currently the copper market has enough stocks to meet global consumption for 4.9 days, by the end of this year this figure is expected to drop to less than 3 days.[1]
According to the World Bureau of Metal Statistics, the refined copper market this August was short of 170,100 tonnes vs. 60,700 tonnes last August, while over the first eight months of this year the deficit has reached 657,000 tonnes, compared with 283,000 tonnes in the whole of 2021 (see Fig. 1). To add insult to injury, LME copper stocks are now rather low (see Fig. 2). While currently the copper market has enough stocks to meet global consumption for 4.9 days, by the end of this year this figure is expected to drop to less than 3 days.[1]
Copper production is now slowing, as this mineral, albeit being in abundance globally, is becoming harder to unearth.[2] While in the next few years there may be some surplus of refined copper (155,000 tonnes in 2023, according to the International Copper Study Group[3]), this oversupply will be short-lived, only to be followed by an even tighter market towards the end of the decade as the energy transition accelerates, spurring demand. Over the next decade, 9.7 million tonnes of new copper supply will be required, with $23 billion in annual investment needed over 30 years to deliver new copper projects to reach zero-carbon targets, estimates by Wood Mackenzie suggest.[4]
A tonne of copper now costs around $7,600 (see Fig. 3). The copper price, however, must rise to as much as $9,370 per tonne [5] in order to meet growing demand and make marginal deposits viable to operate, thus providing enough supply to move ahead with decarbonization. And this rise doesn’t look outlandish, as potential supply hiccups could push up prices even further.
A tonne of copper now costs around $7,600 (see Fig. 3). The copper price, however, must rise to as much as $9,370 per tonne [5] in order to meet growing demand and make marginal deposits viable to operate, thus providing enough supply to move ahead with decarbonization. And this rise doesn’t look outlandish, as potential supply hiccups could push up prices even further.
