On August 4th, Xinhua News Agency reported that Chilean President Borrice recently stated that a cave-in accident occurred at the world's largest underground copper mine in southern Chile, El Teniente, resulting in the deaths of six people. According to media reports, the Chilean National Copper Company (Codelco) has initiated an investigation into the cause of the accident, and all underground operations have been halted. It is currently unclear how long the production halt will last and whether it will affect the company's production targets.
El Teniente is located in the region of General O'Higgins, the liberator of Chile. It is one of the core mining areas operated by the Chilean state-owned copper company Codelco. The mining area is situated at the western foot of the Andes Mountains, at an altitude of 2,500 meters. The reserves of ore are 5.95 billion tons and the reserves of refined copper are approximately 51 million tons. It is the world's largest underground copper mine. It was invested and put into production by the American Braden Company in 1907 and was nationalized in 1971 and incorporated into the national copper mining development system.
In 2024, El Teniente produced 356,000 tons of copper, accounting for more than a quarter of the total output of the Chilean state-owned copper company Codelco and 6.7% of the national copper output in Chile. Previously, the operation of the Kamoa-Kakula copper mine in the Democratic Republic of the Congo was halted due to earthquakes and water inrushes. In Peru, informal miners suspended negotiations with the government and claimed they might resume protest activities. The news of El Teniente's production halt once again ignited the already tense copper market sentiment. Multiple supply-side disturbances exacerbated investors' concerns about the stability of copper supply. Affected by the mine disaster news, the London Metal Exchange (LME) copper futures price rose for three consecutive days.
On a global scale, copper, as an important metal, its price and production fluctuations have a profound impact on economic development. According to the quarterly and annual reports of major listed mining enterprises, in 2025, the new construction and commissioning projects of global copper mines will be relatively limited. Instead, there will be continuous ramp-up production of new and expanded projects in 2024, as well as resumption and expansion projects of old mines. Without considering potential disruptions at the mines, an optimistic estimate suggests that global copper mine production in 2025 will increase by approximately 620,000 tons compared to last year.
The main constraint on the release of copper production capacity is the insufficient capital expenditure. Global copper mine capital expenditure has remained low since it peaked in 2013. The development cycle of new mines lasts for 7 to 10 years, and there will be a scarcity of incremental production after 2025. The initial capital expenditure for new copper mines in 2000 was 4,000 - 5,000 per ton, and the average value in 2025 has reached 17,700 per ton.
Currently, 50% of the world's major mines have been in operation for more than 20 years, with an average grade decline of 40% (from 1% to 0.6%). The aging of mines and the decline in grade have led to an increase in mining costs. In 2024, the average C1 cash cost of copper worldwide is approximately 5,700−5,900/ton (2.59−2.67/pound).
In terms of demand, according to the consumption structure of copper, the power industry accounts for approximately 45%-48%, which is the largest application sector for copper, mainly used in power grid construction, transformers, cables, etc.; the transportation sector accounts for 12%-15%, with the amount of copper used in new energy vehicles being four times that of fuel vehicles (about 80-120 kg per vehicle); the construction industry accounts for 8%-10%, with its growth rate slowing down due to real estate regulation, but green buildings (such as copper water pipes, photovoltaic roofs) provide new growth points; household appliances/electronics: accounts for 14%-15%, driven by smart appliances, 5G base stations, data centers, etc., the demand for high-end copper materials; the new energy sector (wind and solar power) has a rapidly increasing proportion, with about 90 tons of copper consumed per GW for photovoltaic and about 40 tons per GW for wind power.
In terms of total volume, the institutions predict that the global copper demand will be approximately 28 million tons in 2025, with an average annual growth rate of 4% - 5% (historical average 2%). The core growth drivers are electricity and new energy vehicles. By 2030, the global demand may exceed 30 million tons. In the next five years, the increase in copper demand will mainly come from three areas: new energy vehicles, wind and solar power, and power infrastructure, with an average annual growth rate of over 4%.
In the long term, the supply side will see limited growth and there will be prominent structural issues. Looking at the medium to long term, the new energy industry will remain one of the main drivers of global copper consumption growth.
