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Demystifying Copper Rush

Let’s uncover the importance of copper and why its prices are skyrocketing.

Copper Scarcity: Modern Solution led Modern Problem

Have you caught the buzz about copper prices skyrocketing lately? It’s all over the news—prices are surging, and supply chain issues seem just around the corner. Now, you might be thinking, “So what? Why should I care about the cost of copper if it doesn’t directly affect me?” Let me tell you, the situation with copper affects our daily lives more than you might imagine.

Thanks to its excellent characteristics, like heat and electricity conductivity, superflexibility (malleability), ease of shaping (ductility), and corrosion resistance, copper is everywhere. Peek inside your TV, take a look at your fridge, or think about your car, smartphone, oven, and microwave. Yep, copper plays a crucial role in all of them.

To quote Baba Ranchhoddas from 3 Idiots, “Sir actually hum machino se gheere huve hain. Pen ki nib se lekar pant ki zip tak sab machine hai sir. Ek second mein up, ek second mein down, up down, up down.” All these machines have copper in it. Yes, even your zipper is made from brass which is made from the alloy of copper and zinc.

So today, we will try to simplify the importance of copper and what led to its current price level.

Copper: The Miracle Metal

Copper was one of the earliest metals to be used by humans and its discovery marked the end of Stone Age and the beginning of Copper Age. This also marked the beginning of human civilization which would evolve into the complex modern society that we live in today.

This versatile metal has been at the heart of countless societies. The Egyptians crafted statues and jewelry and even used it in the Great Pyramid of Giza. The Romans expanded its use to buildings, medicine, military gear, coins, and sculptures.

Similarly, around the world, copper was used for art and painting, medicines, tools, vessels and utensils, weapons, buildings, sculptures, etc. at different time period. Since countries and continents were not much connected, it can be said that humans all around the world came up with similar conclusion for the importance and usage of copper.

But here’s where copper truly shined: During the Second Industrial Revolution in the late 19th and early 20th centuries.

Imagine factories humming with electricity, all thanks to copper wires and cables. Suddenly, talking to someone miles away became possible with telegraphs and phones, all because of copper. From then on, copper was everywhere—in cars, planes, submarines, TVs, fridges, computers, the internet, GPUs, and data centers.

So, with every leap in technology, copper’s role only grew, becoming the necessity in our journey through the ages of innovation. Along with that, the production of copper also skyrocketed.

You might be asking, if we understand copper’s critical role as a commodity, what went wrong that we are seeing its prices soar today, with expectations of staying high in the future?

This is due to the impact of copper production. Let’s dive into the details.

Man-made Mess:

Copper manufacturing has significant drawbacks, leading to a decrease in mining and production.

Geopolitical Challenges – Chile and Peru, with 40% of global copper, face political, labor, and economic disruptions affecting supply.

Environmental Challenges – Mining harms forests, habitats, and water, creating waste and pollution that impact ecosystems and health.

Regulatory Hurdles – The 2023 closure of Cobre Panamá, contributing 1.5% to global supply, and legal issues in Chile and the US, slow down production.

Declining Ore Quality – As high-grade ores deplete, miners extract lower-grade ores (0.5% copper),increasing the cost of extraction.

Due to the above reasons, the copper production sector saw an underinvestment for the last 10 years.

As we face a tightening supply of copper, its demand is set to skyrocket. A key driver behind this surge is what many see as the next phase in human evolution.

Increasing Copper Demand:

1. Moving towards a Greener Future – As climate change worsens, shifting to sustainable energy becomes essential. This moves away from fossil fuels to electric vehicles (EVs) and renewable energy increases the demand for copper. Here’s why:

a. EVs use 2.5x more copper than traditional internal combustion engines.

b. The copper needed for power grids could increase 5x by 2050.

c. Renewable energy sources like solar and offshore wind use 2 to 5x more copper per megawatt (MW) compared to gas and coal.

d. Onshore wind turbines need about 10 tons of copper each, while offshore turbines need around 20 tons.

e. Data centers, crucial for AI and the Internet of Things (IoT),could require 20 to 40 tons of copper per MW of capacity. As technologyadvances, the demand for data centers is set to soar.

In short, our journey to a greener future is paved with copper.

2. Replacement Needs – Worldwide, vital underwater cables for internet, telecoms, and power are aging, like the SAFE cable linking Africa to Asia, retiring in 2027 after 25 years. The transmission line market is set to grow from $106 billion in 2024 to $159 billion by 2032, driven by replacing old infrastructure and expanding for higher demand and renewable energy integration.

3. Asia Factor

Asia consumes 74% of the world’s copper, with China alone using 50% and driving most of Asia’s demand, especially as it boosts its real estate sector. China’s leading role in the electric vehicle market also suggests its copper demand will continue to grow.

Other Asian giants like India, Japan, and South Korea, with their large electronics sectors, are expected to increase their copper usage as well.

Current Challenges, Future Hurdles: Quick Look

1. We’re facing a daunting task: to mine as much copper in the next 20-25 years as we have in the last 10,000 years.

2. Copper demand is expected to leap from 28 MMT today to 53 MMT by 2050.

The push for global green energy will significantly boost copper demand by 2030.

1. To keep up with expected demand, we need to mine 115% more copper in the next 30 years than we’ve mined throughout history—and that’s not even counting the shift to electric cars worldwide.

2. To meet this skyrocketing demand, we need six new large copper mines to start operating every year by 2050.

Mining Challenges

Here’s the crux of the issue: from discovering a new copper deposit to getting the green light to build a mine, it now takes 20-25 years which also might not turn out to be profitable. That’s why current mine operators are focusing on expanding existing mines rather than searching for new ones.

While this strategy works for now, it won’t be enough in the long run. Opening new mines will become a necessity.

Copper Price:

At one hand, we are increasing copper demand and on the other hand we supply suffocating its supplies. As a result, copper prices are rising high and there is currently a copper bull run underway.

Here’s what some of the major producers, traders, and investors are saying about copper prices:

  1. Robert Friedland, Founder and Chairman of Ivanhoe Mines: “You’re going to need a telescope to see copper prices.”
  2. BHP CEO Mike Henry: “The world will need two times more copper in the next 30 years.”
  3. Legendary investor Stanley Druckenmiller: “Copper is a pretty simple story, takes about 12 years, greenfield to produce copper, and you got EVs, the grid, data centers, and believe it or not munitions. These missiles all got enough copper in them and the world’s getting hot that we just think the supply-demand situation is incredible for the next five or six years.”
  4. Goldman Sachs: “Copper is the new oil.”

Closing Remarks

Historically, advances in human progress have always led to increased copper use, a trend expected to persist, making copper demand a key indicator of economic growth. Our challenge is to ramp up copper production in an eco-friendly manner.

With emerging technologies aimed at improving mining and production, we’re hopeful. Given our history of overcoming obstacles, we can only be optimistic and say that this time also, we humans will figure something out.

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