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Demand for copper will double by 2035, opening up a supply gap
that threatens climate goals and poses serious challenges to the
Net-Zero Emissions by 2050.
This demand growth during the energy transition — a pathway
toward transformation of the global economy to Net-Zero Emissions
by 2050 — will be particularly pronounced in the United States,
China, and Europe. India will also exhibit strong copper demand
growth, more from traditional copper applications than from the
energy transition.
Copper — the "metal of electrification" — is essential
to all energy transition plans. Deeper electrification requires
wires, and wires are primarily made from copper. Technologies
critical to the energy transition such as electric vehicles (EVs),
charging infrastructure, solar photovoltaics (PV), wind, and
batteries all require much more copper than conventional
fossil-based counterparts.
The potential supply-demand gap will be very large as the
transition proceeds. Copper supply shortfalls begin in 2025 and
last through most of the following decade. Substitution and
recycling will not be enough to meet the demands of EVs, power
infrastructure, and renewable generation. The goal of Net-Zero
Emissions by 2050 will be short-circuited and remain out of reach
unless massive new supply comes online in a timely way.
Copper scarcity may also jeopardize international security.
Projected annual shortfalls will place unprecedented strain on
supply chains. The challenges this poses — reminiscent of the
20th-century scramble for oil — may be accentuated by an even
higher geographic concentration for copper resources and downstream
industry to refine it into products.
Increasing supply
We see three possible legs to increasing supply:
New mines or major expansion of existing mines.
Higher capacity utilization—that is, increasing output as a
percentage of a mine's total capacity.
The "aboveground mine"—recycling—that is extracting
copper from discarded batteries, old wiring, and other
equipment.
Theoretically, future demand could be met by opening three
"tier-one" mines, each producing 300,000 metric tons of copper per
year every year for the next 29 years. That would be a monumental
and taxing job, and without any precedent historically and costing
over $500 billion in today's dollars.
So, instead, in our report — a collaboration across S&P
Global's Economics & Country Risk, Commodity Insights, and
Mobility teams — we explore two supply-side scenarios built
around the major metrics —utilization and recycling.
Rocky Road Scenario
The Rocky Road Scenario is grounded in the realities of today's
global industry, with all the obstacles and challenges identified
in our report. Capacity utilization and recycling continue at the
average rates of current trends, girded by the continuing operating
and investment challenges that are endemic today. New environmental
restrictions and controversies, along with environmental, social,
and governance (ESG) pressures from investors, shift investment and
managerial attention and slow growth.
In this scenario:
There would be a chronic shortfall in copper supply from 2024
onward.
The annual supply shortfalls reach nearly 10 MMt in 2035 —
equivalent to 20% of demand projected to be required for a 2050
net-zero world.
The United States will have to import 67% — that is
two-thirds — of its refined copper demand by 2035.
Surpluses would not arise and a much steeper gap between supply
and demand would persist through 2050.
Net-Zero Emissions by 2050 would not be possible.
High Ambition Scenario
The High Ambition Scenario is based on highly optimistic
assumptions about advances in recycling and capacity utilization of
mines and refineries.
In this scenario:
The annual shortfall is, at its highest, 1.6 MMt in 2035.
The United States will need to import 57% of the refined copper
during the years of highest energy transition.
Surpluses will likely emerge in the 2040s as energy transition
copper demand slows and secondary production (the refining of
recycled copper) sees an upswing.
There is still not enough copper to meet the demand identified
for Net-Zero Emissions by 2050.
Risks to international security
Commitment to the Paris Climate goals imply an intensifying
drive — and competition — in the 21st century for the raw
materials needed to achieve those goals. The ensuing scramble may
be compared to that for fossil fuels in the 20th century. But
copper production is more concentrated than oil. The two top
producers — Chile and Peru — account for 38% of world
production.
Supply chain resilience has emerged as a strategic imperative,
particularly after the COVID-19 pandemic and the war in Ukraine. By
2035, the United States will be importing between 57% and
67%—that is up to two-thirds—of its copper needs.
An intensifying competition for critical minerals is very likely
to have geopolitical implications. While both the European Union
and the United States have highlighted the centrality of minerals
in the clean energy transition, neither classifies copper as a
critical minerals.
China is the copper market's center of gravity. It alone will
play a critical role in copper markets for decades to come, as the
largest, single demand country globally. Continued trade tensions
and other forms of competition between the United States and China
could affect the copper market going forward.
Regardless of source of demand the top five refined
copper-consuming countries today are dominated by industrialized
countries. By 2050, however, only China and the United States will
remain in the top five, while India, Vietnam, and Mexico will
supplant Germany, Japan, and South Korea in the global
rankings.
Priority areas
There is no way to forestall the projected shortages in copper
without taking steps to increase supply. Three priority areas stand
out for consideration and further refinement:
Policy: Clear policy objectives that connect
critical minerals production with clean energy end-use goals would
provide investment stability and assure long-term political
acceptance and social license.
Technology: Innovation that enables cleaner,
more efficient, and lower-cost extraction and refining of copper
could help increase supply directly. If such innovation addressed
environmental and social concerns of a growing portion of
investors, then it would also attract more capital into the
industry and increase supply indirectly.
Interdependencies: The energy transition will
require other critical minerals, many of which are only produced as
co-products or by-products of copper processing (smelting and
refining). Understanding these wider interdependencies will be
important to ensure that the path forward is not blocked by similar
issues emerging for other critical minerals required for increased
electrification.
Unless the considerable gap between demand requirements and
supply realities is closed, especially between 2025 and 2035, the
2050 target for net zero will be pushed further into the
future.
Download the complete report
for deeper insights on supply and demand, the impact of shortfalls
(especially in the US), and the larger operational challenges at
play.