The global drive towards clean energy is facing a potential roadblock: a looming copper supply shortage. Copper, a vital metal in electric vehicles, renewable energy infrastructure, and electronics, is becoming increasingly difficult and expensive to extract. This challenge stems from a combination of factors plaguing existing copper mines and obstacles hindering the development of new ones.
Existing Mines Struggle with Declining Output and Rising Costs
Many of the world’s largest copper mines are mature operations contending with declining ore quality. This means they are producing less copper from the same amount of rock. Chile’s Chuquicamata mine, the world’s biggest open-pit copper mine, exemplifies this trend. As the mine extracts copper from ever deeper reserves, the ore becomes more complex and expensive to process. These challenges have resulted in cost overruns and delays in expansion projects at Chuquicamata. The mine’s output has plummeted from half a million tons in 2010 to below 250,000 tons in 2023.
Developing new copper mines to meet rising demand is proving difficult. Stringent environmental regulations, social unrest in mining regions, and lengthy permitting processes can take years to navigate. For instance, a recent study by Flashpoint Capital, a merchant bank, revealed that 31 out of the top 40 copper projects worldwide face significant social, environmental, or regulatory hurdles. In a stark example, public protests in Panama led to the government shutting down one of the world’s largest copper mines in December 2023.
Industry Needs Major Investment to Bridge Supply Gap
Analysts estimate the copper industry needs to invest a staggering $150 billion over the next decade to close the projected supply gap. However, achieving this level of investment hinges on copper prices exceeding $10,000 per ton, according to Trafigura Group CEO Jeremy Weir. While some analysts, like CRU, a metals research firm, predict lower demand growth than others, they still acknowledge significant constraints on the supply side. The amount of copper extractable from mined rock has been halved over the past two decades, and recent exploration efforts haven’t yielded many major discoveries.
The copper industry faces a critical challenge. Meeting the rising demand for copper, essential for the green transition, requires overcoming hurdles in both existing and new mines. The industry needs to find ways to operate more efficiently at existing mines while navigating stricter regulations and community concerns to develop new ones. If these challenges are not addressed, the green transition could be hampered by a lack of this vital metal.
Source: Mining.com
