Back to the complete issue
Tuesday, 3 August 2021

We (quite literally) just can’t get enough of copper

Market strategists have been warning of a shortage in copper that could come knocking our doors sooner than later. This is because the essential metal is in huge demand despite soaring prices, thanks in no small part to its importance to green industries of the future including electric vehicle production and solar energy.

Why is this a problem worth noting? We’re yet to see the new, higher prices translate into new supply. If that doesn’t happen, the world runs the risk of an unavoidable shortage “with dire consequences,” CNBC suggests (watch, runtime: 8:52).

The boom: Copper is one of the most important raw materials in the global green transition. Electric cars need nearly four times more copper than their traditional counterparts, and renewable energy power grids — on which much of the world will rely in the future — also run on more of the metal than the global industry currently produces. All of this means that demand is likely to continue rising as we move deeper into the century.

Prices have spiralled since the global pandemic erupted: The futures price has more than doubled since March 2020, reaching a record high in May thanks to widening supply-demand gap.

This isn’t all down to countries doubling down on green technologies: Pandemic-related trade disruption, local problems in major copper-producing countries and stimulus-driven speculation have all contributed to throwing supply-demand dynamics out of whack.

This could jeopardize ambitions to clean up the planet: The International Energy Agency warned in May that heightened prices could impede the transition to green technologies. Demand for copper and other metals will quadruple if the world is to meet the Paris climate goals, a trajectory that the agency’s executive director said will not be sustainable at current price levels.

We just need to mine a little harder: It’s not that we don’t have enough copper. In fact, humans have only mined some 12% of all copper on the planet throughout history, and much of what has been mined gets circulated and reused. The real issue is that the current mining and recycling infrastructure isn’t capable of standing up to the coming boom expected to be brought about by the so-called “green energy revolution.”

Local issues: Chile and Peru provide almost 40% of the world’s supply of copper but recent events are slowing both these countries’ abilities to scale production. Chile this year introduced new environmental rules and could introduce a new royalty, both of which reduce margins and make copper mining less attractive to investors. Over in Peru, a USD 1.4 bn copper project that was supposed to start operating in 2011 still hasn’t been finished due to local opposition.

SOUND SMART– The copper market is typically considered a proxy or indicator for economic growth because of how commonly used it is. Industry bums often jokingly call the metal “Dr. Copper” to emphasize the idea that the metal might as well hold a PhD in economics. As long as demand for copper is high and supply is keeping pace, news of a copper boom is good news for the economy.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Etisalat Misr (tax ID: 235-071-579), the leading telecoms provider in Egypt; and Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt.