Copper industry needs to invest $2.1 trillion over the next 25 years to meet demand – Richard Mills

2025.02.27

“As we look towards 2050, we foresee global copper demand increasing by 70% to reach 50 million tonnes annually. This will be driven by copper’s role in both current and emerging technologies, as well as the world’s decarbonization goals,” says BHP’s chief commercial officer Rag Udd.

The largest mining company in the world expects that by 2050 the energy transition sector will represent 23% of copper demand compared to the current 7%. The digital sector including data centers, 5G and AI is projected to rise from 1% today to 6%.

Transportation’s share of copper demand is expected to climb from about 11% in 2021 to 20% by 2040, thanks to the EV rollout.

On the supply side, BHP points to the average copper mine grade decreasing by around 40% since 1991. The next decade should see between one-third and one-half of the global copper supply facing grade decline and aging challenges.

The company estimates that an investment of $250 billion will be required to address the widening gap between supply and demand.

Two other sources confirm that huge new investments in the copper sector are required.

According to BloombergNEF’s annual Transition Metals Outlook, the industry will need $2.1 trillion by 2050 to meet the raw materials demand of a net-zero-transmissions world. As stated by Mining.com, Despite a decade of growth in metals supply, BNEF reports that current raw material availability remains insufficient to meet the rising demand.

The report highlights that critical energy transition metals, including aluminum, copper, and lithium, could face supply deficits this decade — some as early as this year.

China is the world’s biggest copper consumer, so what happens there is watched closely be copper bulls and bears alike.

China in September announced its biggest economic stimulus since the pandemic, which caused big jumps in Chinese and American stock markets, along with commodities.

The aim is to achieve a 5% annual growth target. Yahoo Finance reported the stimulus — designed to pull the economy out of a slump caused be a property crisis and deflationary measures — includes over $325 billion in monetary measures.

The People’s Bank of China reduced the reserve requirement ratio — the amount required by banks to set aside for loans — by half a percentage point, freeing up about $142 billion in short-term liquidity.

The plan also lowers short- to medium-term interest rates and makes mortgage relief a top priority, says Yahoo Finance.

These moves are expected to benefit about 50 million households, saving them $21.3B annually in interest expenses.

The central bank also introduced a plan to prop up China’s ailing stock market. A $71 billion stock market stabilization program will allow securities firms funds, and insurers to access funding for stock purchases through a swap facility, Yahoo Finance explained.

If China adds fiscal measures (i.e. government spending) to its monetary tools, particularly for infrastructure, commodities would likely see another big push, impacting everything from US manufacturing to energy sectors.

Wall Street commodities investment firm Goehring & Rozencwajg quoted data from the World Bureau of Metal Statistics confirming that global copper demand remains robust, outpacing supply. Through the first eight month of 2024, the bureau said, copper demand grew by nearly 4%, with standout gains driven by non-OECD nations Malaysia, Taiwan, Vietnam and Brazil, which saw consumption grow by 8.3%.

On the supply side, the torrid pace of growth in copper output from the DRC, thanks to Ivanhoe Mines’ recently opened Kamoa-Kakula mining complex, has moderated from annualized growth of 6-7% to around 3% year-over-year growth.

China, however, is the wild card in the copper market.

Having posted a 13% surge in copper consumption in 2023 versus 2022, growth decelerated sharply in 2024, with consumption rising just 3% through the first eight months.

But China has now entered an era of overconsumption, partially explained by massive investments in renewable energy and electric vehicles.

According to G&R, By 2023, China’s copper investment per capita reached 280 pounds—40 pounds above the 240 pounds necessary to support its GDP per capita of $12,100. By the close of 2024, we project this figure will rise to 306 pounds, exceeding the required level by 45 pounds.

Chinese overconsumption is considered bearish for the metal because when China consumes significantly more copper than it needs, it can lead to large stockpiles, which then puts downward pressure on prices by signaling an oversupplied market, potentially causing a decrease in global demand for copper as other buyers become hesitant to purchase due to the readily available surplus from China; this is especially concerning given China’s dominant position as the world’s largest copper consumer. (Google AI Overview)

However, Bank of America projects copper will reach $10,750 per tonne ($4.87/lb) in 2025.

Copper is in a robust position due to strong demand, limited supply, and increased investment in energy transition projects, according to BoA analysts.

The red metal hit an all-time high of $5.20 per pound in May 2024 due to a supply squeeze. The transition to renewable energy, the rise of electric vehicles, and the growth of artificial intelligence (AI) have all increased demand for copper. 

Chile is the world’s largest copper producer and the price forecast from its copper commission, Cochilco, puts copper at $4.25 a pound in 2025 and 2026. It expects copper to remain above $4/lb for the next decade.

As reported by Stockhead, Cochilco expect copper demand to rise 3.2% this year to 27.4 million tonnes, outpacing supply of 27.3Mt and generating a deficit of 118,000 tonnes.

Total mined copper in 2024 was 23 million tonnes, according to the US Geological Survey, with Chile supplying 5.3Mt.

Cochilco’s acting executive vice president Claudia Rodriguez said the country sees copper demand lifting due to the energy transition, electrical networks and restricted supply.

Stockhead notes Chile’s mines have been a disappointment in recent years, and last month downgraded its 2034 supply forecast from 6.43Mt to 5.4Mt, a cut of around 900,000 tonnes, just under the 1Mt annual production of the world’s largest copper mine, Escondida.

Rodriguez expects a stronger global economy will push copper prices higher From Bloomberg, this year, with the wildcards being China’s economic recovery and President Trump’s tariff war.

A separate article by Stockhead predicts that if 25% tariffs on Canada and Mexico go ahead at the beginning on March, the effect on copper is expected to be neutral. According to Benchmark Mineral Intelligence, while Canada supplies 15% of US refined copper exports and 82% of US wire rod imports, “The lost copper import volume from Canada could be mitigated by a curtailment of refined copper and copper wire rod exports from the US to Mexico, supplemented by imports from tariff-exempt countries like Chile,” Benchmark’s analysts wrote.

From Bloomberg “President Donald Trump has signed an executive action directing the Commerce Department to examine possible copper tariffs, the latest in a string of measures aimed at imposing sector-specific levies that could reshape global supply chains. Copper futures in New York surged nearly 5% for their biggest intraday gain since May last year.” Trump Opens Door to New Metal Levy with Copper Tariff Probe, Feb 25^th 2025

The shift to renewable energy and electric transportation, accelerated by AI and decarbonization policies, is fueling a massive surge in global copper demand, states a recent report by Sprott.

Increasing investments in clean technologies like electric vehicles, renewable energy and battery storage should cause copper demand to climb steadily, and challenge global supply chains to meet this demand.

The report cites figures from the International Energy Agency (IEA), such as global copper consumption growing from 25.9 million tonnes in 2023 to 32.6Mt by 2035, a 26% increase. Clean tech copper usage is expected to rise by 81%, from 6.4Mt in 2023 to 11.5Mt in 2035.

The IEA expects the copper needs from electricity networks to grow from 4.1Mt in 2023 to 6.2Mt by 2035, an increase of 49%. Copper demand for solar panels is expected to rise by 43% and for wind power by 38% over the same period.

The fastest-growing area, though, is grid battery storage, where copper demand is expected to surge by 557% to 2035 as the need for energy storage increases, Sprott writes.

Copper demand for EVs is a close second, with a projected rise of 555% from 396,000 tonnes in 2023 to 2.6Mt by 2035, with EVs accounting for 8% of global copper consumption by that year.

Sprott notes that expectations of a surge in demand for electricity over the next decade are creating a “perfect storm” for the US power grid:

• Demand is being driven by new investment in power-hungry industrial facilities, especially the data centers that support artificial intelligence (AI), as well as U.S. reshoring initiatives and the steady electrification of the transport sector.

• Renewable sources like solar and wind, and revived nuclear generation, should play bigger roles in meeting energy needs. For the foreseeable future, natural gas is expected to remain a crucial part of the U.S. energy mix.

One of the biggest challenges for utilities is building new infrastructure quickly enough to meet skyrocketing demand expected from AI-related spending. While data centers can be built in two years, the approval process in the US for new transmission lines can take up to a decade.

Utilities are responding by deploying more solar and wind power while keeping natural gas as a backup.

Grid-enhancing technologies can improve efficiencies by up to 30% but they are costly and require substantial amounts of critical materials, including copper for conductors, transformers and wiring, says Sprott.

The drivers of electricity demand are multi-faceted. Among the most important is massive investment in facilities with large power loads including manufacturing and industrial facilities and especially data centers supporting artificial intelligence.

Sprott notes that with an additional 333 terawatt-hours of new electricity demand expected by 2030, investments in transmission infrastructure must rise to keep pace. According to Bloomberg New Energy Finance (BNEF), demand over the next decade is expected to compound at an annual rate of 1.3%, twice the growth rate of the prior decade.

Sprott explains how the data center industry — the core of AI operations — is now entering its third wave of growth, driven by AI, machine learning and edge computing. The first wave was the Internet and e-commerce, and the second wave was cloud computing and big data.

AI processing requires a lot more power than traditional computing tasks. For example AI queries consume up to 10 times the energy of a Google search.

Sprott cites a recent Bloomberg Intelligence report forecasting that electricity consumption by data centers is expected to surge by 4-10 times by 2030. At the upper end, data centers could account for up to 17% of total US electricity consumption by 2030.

Morningstar quotes Albert Chu, portfolio manager at Man Group, stating “In the U.S. alone, data centres consumed 17GW of energy; by the end of the decade, it is estimated that data centre energy requirements will double to 35GW.”

Morningstar quotes another source, Benjamin Louvet, head of commodities funds management at Ofi Invest Asset Management, saying that “Let us assume that the U.S., where about half of the AI market is concentrated, will increase its development by an additional 5 GW each year. This alone would increase demand by 500,000 tonnes worldwide, which is equivalent to a 2% increase in global copper demand.”

Researchers at the University of Michigan and Cornell University found that copper can’t be mined fast enough to keep up with current US policy guidelines to make the transition from fossil-fueled power and transportation to electric vehicles and renewable energies.

“We show in the paper that the amount of copper needed is essentially impossible for mining companies to produce,” said Adam Simon, co-author of the paper, published by the International Energy Forum (IEF).

A recent graphic by Visual Capitalist cites data from Benchmark Mineral Intelligence showing that meeting global battery demand by 2030 would require 293 new mines or plants.

In the table below, notice that, of all the metals, copper requires the most additional tonnage, an increase of 3,664,000 tons, or 61 mines.

Visual Capitalist notes, and we wholeheartedly agree, that it is no easy task to build new copper mines, or any mines, for that matter:

After discovery and exploration, mineral projects must go through a lengthy process of research, permitting, and funding before becoming operational.

In the United States and Canada, building a copper mine from discovery to production can take upwards of 30 years.

Other jurisdictions such as Ghana, the DRC and Laos build mines faster, but even in the top copper-producing countries, there are problems.

Chile and Peru are grappling with strikes and protests, along with declining ore grades. Seventh-ranked Russia faces an expected decline due to the ongoing war in Ukraine.

Some of the world’s largest mining companies, market analysis firms and bank are warning that this year, a massive shortfall will emerge for copper, which is now the world’s most critical metal due to its essential role in the green economy.

The deficit will be so large, The Financial Post stated, that it could hold back global growth, stoke inflation by raising manufacturing costs, and throw global climate goals off course.

Two reasons identified by Sprott why supply is not keeping up with demand; developing a new copper mine is lengthy and expensive, often taking over a decade from exploration to production; and the mining sector has seen long periods of underinvestment, when low copper prices meant reduced exploration budgets and fewer discoveries.

There has also been an overdependence on mergers and acquisitions. It’s much easier for a copper mining company to increase its reserves by purchasing a smaller company (and its reserves), than dedicating capital to greenfield exploration, which is expensive and risky.

Capital for the development of copper mines peaked at $26.13 billion in 2013. Since then, it has almost halved and remained low, with only $14.42 billion spent in 2022, according to Sprott.

Despite the funding gap, several commentators have mentioned the dawn of a new copper supercycle focused on the global energy transition, compared to the previous commodity supercycle that was driven by China’s industrialization and urbanization.

Five reasons why we are entering the next copper super cycle — Richard Mills

Morningstar reports that Global efforts towards decarbonisation are a structural growth engine for many raw materials or metals, and copper is one of the key metals for the energy transition.

For example, wind and solar are among the most popular forms of renewable energy today. The graph below shows the amount of copper required to generate energy from offshore wind (wind turbines in the sea), onshore wind (wind turbines on land) and solar photovoltaics compared to fossil fuels such as coal and natural gas.

The term “resource nationalism” is loosely defined as the tendency of people and governments to assert control, for strategic and economic reasons, over natural resources located on their territory.

Two relatively recent examples of copper resource nationalism took place in Peru and Panama.

Peru, the world’s second-largest copper producer in 2023 was racked by protests owing to a change of government. A strike at the Las Bambas copper mine threatened about 250,000 tonnes of annual production.

Also in 2023, the government of Panama ordered First Quantum Minerals to shut down its Cobre Panama operation, removing nearly 350,000 tonnes of copper from global supply.

Another reason for copper supply running short has to do with instability in copper-producing countries.

Last year, Morningstar reported a 6.5% reduction in quarterly production at Ivanhoe Mines’ Kamoa-Kaukula copper complex in the Democratic Republic of Congo, Africa’s largest copper producer.

Ivanhoe blamed the production miss on the DRC’s unstable power grid.

However, the DRC has never been a great place to go mining, and companies that set up operations there do so at considerable risk.

The DRC holds two major distinctions. First, it is the richest country in the world in terms of mineral wealth, at an estimated $24 trillion, and it is the country in which the highest number of people — estimates go as high as ten million — have died due to war since World War II.

Allegations of human rights abuses including child labor have put the DRC in the wrong kind of spotlight, Daimler (owner of Mercedes), Volkswagen and Apple are among big-name companies that source raw materials from the DRC and are facing intense pressure to make their supply chains transparent.

Since 1996, conflict in eastern DRC has led to approximately six million deaths. Read more

Recent news is disturbing. On Friday, United Nations human rights chief Volker Turk said the worst may be yet to come in east Congo’s escalating crisis, warning that abuses including rape and sexual slavery may increase. (Reuters, Feb. 7, 2025)

Rwanda accuses neighboring Congo of planning a large attack, with Rwanda’s ambassador to the UN adding that Kinshasa and its allies had stockpiled weapons in and around Goma airport.

Then there is the threat of disease. The conflict has reportedly multiplied the risk of diseases spreading, including cholera, malaria, tuberculosis and the deadly mpox virus. According to Reuters,

The WHO reported 600 suspected cholera cases and 14 deaths in the last month in North Kivu province, where disrupted water supplies have heightened the risk of the spread of the disease.

Richard (Rick) Mills
aheadoftheherd.com

Subscribe to AOTH’s free newsletter