Each of the IOE&IT Daily Update series on commodities examines a major product and cover the latest news relating to how it is traded on the global marketplace. This week we consider a metal that is increasingly important to our digital world: copper.
Copper was the third-most-consumed industrial metal in the world, after iron and aluminium, with an estimated 22m metric tons mined in 2022.
Global production has seen steady growth over the past decade, rising from 16m metric tons in 2010.
Humans have been using copper for around 8,000 years and demand for the metal continues to grow due to its importance in areas such as electrical wires, telecommunication cables and digital devices.
Uses
About three-quarters of copper is used for these purposes.
Copper’s anti-microbial properties have made it a popular metal in the medical field, and it has also been shown to increase agricultural yields, according to Livescience.
Despite an ever-increasing demand, there is more of the metal available today than at any other time in history, according to the Copper Alliance.
Over 30% of global demand was met by recycled copper in the last decade.
In 2020, the raw copper trade was worth $14.4bn, and raw exports grew by 23.8% from the previous year, according to data provided by the Observatory of Economic Complexity.
The leading raw copper exporters by value in 2020 were:
- Zambia - $5.77bn
- Chile - $1.88bn
- Namibia - $1.37bn
- Bulgaria - $1.01bn
- Democratic Republic of the Congo - $710m
The main importers were:
- China - $5.34bn
- Switzerland - $2.3bn
- Belgium - $1.29bn
- Namibia - $1.18bn
- India - $1.03bn
Deficits ahead
Although there is no shortage of copper in the ground, a deficit is set to inundate global markets throughout 2023 and could extend throughout the rest of the decade.
“We’re already forecasting major deficits in copper to 2030,” Wood Mackenzie’s vice president of metals and mining, Robin Griffin told CNBC.
Reasons for the shortfall include ongoing unrest in Peru, which accounts for about 10% of global supply, reports the FT.
Latin American politics
Anti-government protests are disrupting Peruvian copper output, triggering predictions of a further surge in prices for the metal, which has already rocketed in recent months as China’s economy reopens.
Prices have soared by more than 20% to just below $9,000 per tonne in about three months and could go as high as $12,000 per tonne, according to Michael Widmer, commodity strategist at Bank of America.
Meanwhile, Chile, which accounts for 27% of global supply, recorded a year-on-year decline of 7% in November.
Chile’s government – led by president Gabriel Boric – has also rejected a controversial $2.5bn iron and copper mining project proposed in an important area for biodiversity and marine life, reports the Guardian.
Boric, who was elected in 2021 on a pro-environmental platform, has indicated he will oppose mining initiatives that are harmful to the environment.
Additionally, there are reported issues in Panama after the maritime authority there banned the loading of copper at the port of mining pit Cobre Panama over a certification issue, according to ING.
The mine is responsible for 1.5% of global copper production.
New sources needed
Unearthing new supplies is problematic, as big mining companies are nervous about expansion, even as shareholders demand investment in response to robust commodity prices, China’s reopening and the role of minerals in decarbonising the economy.
“It is an increasing issue, because if you haven’t been spending a lot on development or cut back, as they all have since prices fell in 2015-16, you can’t do that forever and expect to continue to grow,” George Cheveley, portfolio manager at asset manager Ninety-One told Reuters.
A drive by the US and Europe to reduce their dependence on China, which dominates the processing of battery minerals, is persuading companies to look to other sources.
Capital spending by mining companies is set to decrease 11% in 2023, with exploration spending likely to fall by 10-20%, according to S&P Global Commodity Insights.
Exploration issues
However, copper exploration’s total budgets increased 21% to just shy of $2.8bn in 2022, the highest level since 2014.
S&P points out that larger exploration budgets over the past several years – most of which is being spent in Latin America – have not led to a meaningful increase in the number of recent major discoveries:
The analytics company predicts a market surplus over the next three years, followed by a nearly 400kt undersupply in 2026.
