• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 12 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 1 day How Far Have We Really Gotten With Alternative Energy
  • 6 days By Kellen McGovern Jones - "BlackRock Behind New TX-LA Offshore Wind Farm"
  • 1 day Solid State Lithium Battery Bank
  • 13 days Natron Energy Achieves First-Ever Commercial-Scale Production of Sodium-Ion Batteries in the U.S.
  • 1 hour Bad news for e-cars keeps coming
  • 12 days The United States produced more crude oil than any nation, at any time.
Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

BHP-Anglo Debacle Shines Spotlight on Copper Scarcity

  • Copper prices are soaring amid concerns about resource scarcity and expectations of a supply deficit.
  • New copper asset development is hindered by long lead times and declining grades, and investments in new production capacity have been weak.
  • Miners are hesitant to invest heavily in new mines due to peak demand concerns and stringent regulations.
Copper

This week saw BHP’s last attempt to acquire fellow miner Anglo American fail. The negotiations had lasted six weeks, the offer prices were hiked twice, and yet the deal broke down. Because BHP only wanted Anglo’s copper operations. The deal, although failed, put copper in the spotlight—on the scene of resource scarcity.

Earlier this month, copper prices reached a record high, while BHP tried to convince Anglo executives and shareholders to agree to spin off the company’s platinum and iron ore business and sell itself as a copper producer. The price per tonne in New York topped $11,000 earlier this month.

The FT attributed the price surge to an influx of speculative traders flooding the copper space at a time when many thought copper was about to start going down. Yet there was—and still is—the expectation that sooner or later the copper market would swing into a deficit, because demand is set to outpace supply amid transition efforts in Europe and North America. Now it turns out it’s not just the transition that will drive stronger copper demand.

Goldman Sachs this week forecast that demand for copper is about to take off on the back of the transition but also because of artificial intelligence development and defense spending. According to the bank, copper prices could hit $12,000 per ton thanks to these sources of demand—because new supply is not exactly forthcoming, as evidenced by BHP’s desperate attempts to secure assets through the Anglo acquisition.

The deal “shows the only way for miners to grow their revenue with copper is through acquisition since no new major copper assets are available. Even if they did exist, it may take up to 20 years to permit and build,” Peter Bryant, the chairman of consultancy Clareo and resource industry expert, told Oilprice.com.

Not only this, Bryant said, but even brownfield expansion will not help secure sufficient new supply of copper because of declining grades, increasing depths of available resources, increasing distances from processing facilities and the respective increasing use of energy, water, and work. Things are not looking good for copper supply.

Investments in new copper production capacity have been weak, too, for about a decade now. The fact, as noted by Goldman Sachs in its latest forecast, was a result of poor returns on investment over the previous decade. Now, the outlook for demand looks great and yet copper miners are still not throwing billions at new mines. This might be because peak demand is too close around the corner.

BHP’s chief executive said recently that boosting copper supply to a degree that would ensure meeting demand by 2030 would require $250 billion in investment. But according to Clareo’s Bryant, “peak demand, starting roughly in 2035, does not last for the life of a major asset so there’s no incentive to build new supply that will only be needed for a fraction of the life of an asset. In short, demand has to flatten.” 

No wonder, then, that miners have only spent $50 billion out of the $250 billion estimated to be needed to boost supply to meet demand. And no wonder no one is bothering with investing in new mines amid increasingly stringent regulations when they could simply acquire a fellow miner—or not, as in the case of BHP.

On top of all this, the copper market is currently in a surplus, according to the International Copper Study Group. The ICSG recently reported that the global copper market was balanced in 2023, at around 26.5 million tons of refined copper, but this year, it would swing into a surplus of 162,000 tons, shrinking to 94,000 tons in 2025. This is not exactly conducive to more supply investment.

On the other hand, mine closures and falling ore grades are helping keep a lid on supply growth, as noted by Clareo’s Bryant, so prices shouldn’t drop too low. This would be especially true if forecasts of stronger demand from transition industries—despite the current slowdown—pan out. Then again, the transition may be about to slow down overall as, per Bryant, “this reality is setting in around the ultimate goal of providing all people and businesses affordable, accessible and reliable energy that is as clean as possible.”

It is the affordable and accessible parts that are a challenge for most transition technologies, and that will lead the demand slowdown. On the other hand, this slowdown may help keep the copper market in relative balance—if it weren’t for AI and the compulsion to build more data centers to house the “body” of the technology.

AI is currently emerging as a significant challenge to affordable low-carbon energy because it demands so much of it, wind and solar installations cannot possibly cope with supply it, necessitating the construction of more hydrocarbon generation capacity. But now AI is also turning out to be a rival in the copper demand space. As if the transition needed any more complications.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News