Search For New Copper Sources Reportedly Intensifies As Green Revolution Drives Demand High And Inventory Dwindles

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In January, copper prices pushed past the $4.50 per pound mark for the first time since prices dropped sharply over the last two months of 2021. 

This is just the latest in a nearly two-year trend of copper prices that have more than doubled since 2020. While logic dictates that what goes up must come down, analysts expect the copper market to hold steady at above $4.50 for the next few years. 

The reason? Analysts say it’s the global shift from fossil fuels and toward renewable energy. Electric vehicles (EVs), solar panels, wind turbines and other clean energy alternatives are more widespread, and with nations committing to ambitious climate goals over the next few decades, they may soon outpace their older fossil fuel counterparts.

Copper Prices Soar Above $4.50 Per Pound On Global Electrification Initiatives

Because copper is one of the best conductors of electricity, it’s playing a central role in the electrification process. By 2025, for example, the U.S. is projected to have 7 million EVs on the road with about 5 million charging ports to power them. 

Each one of those EVs will likely require 183 pounds of copper while each charging port will need between 2 pounds and 17 pounds, depending on how powerful it is. For comparison, a standard combustion engine uses just 51 pounds of copper. 

Likewise, the United States’ goal of deploying 30 gigawatts (GW) of wind power by 2030 will require installing about 7,000 turbines per year. "One wind turbine uses 4 megatons of copper," American Pacific Mining CEO Warwick Smith said in an interview with S&P Global Platts.

For the nation’s more ambitious target of generating 40% of its energy from solar power by 2035, copper will also be essential. A solar farm uses roughly 9,000 pounds of copper per megawatt of electricity. 

All told, the global demand for copper has risen from about 17 million tons per year in 2010 to 25 million tons today. It’s projected to exceed 31 million tons by 2030.

Skyrocketing Demand Meets A Copper Market With Stagnating Supply?

Without any major discoveries of new sources of copper, rising demand is projected to outpace mined production as early as 2028. By 2030, the supply deficit could widen to as much as 4.7 million tons. Major mining companies such as Glencore plc GLNCY are not only struggling to maintain current output but are seeing production declines as high as 5% year on year.  

Finding substitutes for copper isn’t exactly a viable option, either. It’s not just the metal’s high conductivity that makes it so important in electrification. Its unique malleability makes it easy to bend and shape into wires, sheets and other shapes to effectively incorporate into a wide variety of designs. 

It’s also a more efficient conductor than other metals. Without copper, cables and other electrical equipment could need about 20% more material to achieve the same efficiency as its copper-containing equivalent.  

How Copper Market Leaders Seem To Be Evolving To Meet Demand

To prevent that looming supply-demand gap, mining companies are investing heavily in exploration projects in hopes of identifying new sources of the important metal. Rio Tinto Ltd. RTNTF, for example, entered a joint-venture, earn-in agreement with American Pacific Mining Corp. USGDF on the exploration company’s Madison Copper-Gold project.

As American Pacific’s flagship asset, the Madison Copper-Gold project has yielded what the company believes are some of the most exciting drilling results to date. The past-producing mine in Montana produced about 2.7 million pounds of copper between 2008 and 2012. 

Under the joint-venture agreement, Rio Tinto must spend $30 million to earn up to 70% of the project. Major investments in exploration projects like this may end up being key to ramping up copper production enough to meet the globe’s growing hunger for the highly conductive metal. 

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Image provided by American Pacific Mining