The world is facing a copper shortage as South America's copper supply becomes increasingly critical and global demand pressure mounts. Analysts at research houses predict the shortage could last until 2030.
Robin Griffin, vice-president of metals and mining at Wood Mackenzie, the global energy consultancy, said: "We are already forecasting significant supply shortfalls until 2030."
Copper supplies may continue to be threatened
Griffin believes the main reason for future copper shortages lies in ongoing unrest in copper-producing Peru and rising demand for copper from the energy transition: "Whenever there is political unrest, it has a range of effects. And the most obvious one is that a lot of mines may have to close."
Peru is one of the world's leading copper producers, supplying 10 per cent of the world's supply. But Peru's copper mine supply has been hit by protests since the impeachment and ouster of former President Pedro Castillo in December.
On January 20th Glencore, a mining giant, announced that it was suspending operations at its Antapaccay copper mine in Peru after protesters ransacked and set fire to it.
Chile's copper production also fell 7 per cent in November from a year earlier. Chile is the world's largest copper producer, accounting for 27 percent of global supply.
"Overall, we believe Chile is likely to produce less copper between 2023 and 2025," Goldman Sachs wrote in a Jan. 16 report.
However, there are more optimistic market participants. "Closures [of copper mines] are very common and I don't think we will necessarily see more than normal," said Timna Tanners, managing director at Wolfe Research. He predicts that several new mines should be added in 2023.
Copper futures settled at $4.035 a pound on Monday, according to the Chicago Mercantile Exchange. The metal earlier hit a low of $3.9930, its lowest level since January 10.
Copper demand continues to rise
While copper supply has weakened, pressure has been mounting on the demand side. Demand for copper has also been boosted by China's improved quarantine policies since late last year and the growth of the global automotive and energy transition industries.
Tina Teng, market analyst at CMC Markets, said: "The reopening of China will have a significant impact on copper prices as it improves the demand outlook and will push prices even higher. At the same time, with the clean energy transition making mining more difficult, supply shortages will push copper prices even higher."
Teng added: "The shortfall in copper supply and demand is likely to persist until the current headwinds trigger a potential economic downturn, around 2024 to 2025." By then, he predicts, copper prices could double.
Mr. Tanner, an analyst at Wolf Research, takes a different view. She does not expect a "huge spurt" in copper production and consumption as China's economy rebounds steadily: "Copper consumption in particular did not slow down in 2022. Factories are still running, government stimulus measures and infrastructure are still slowly moving forward."
However, she adds that broader electrification could be a bigger fundamental driver of copper demand: "You won't see electric vehicles take off until the charging infrastructure is built. In the necessary electrification process, copper is actually used in much greater quantities."
Copper plays an important role in electrification related technologies and energy transition. Sales of electric vehicles more than doubled in 2021, bringing the global total to about 16.5 million, according to the International Energy Agency. That means the EV charging ecosystem will have to be strengthened.
Mackenzie's Mr Griffin said: "There is a longer-term issue with the supply of copper in the Energiewende [industry] because the growth potential for both automotive and transmission is going to be huge."
