The price of copper has experienced an upward rally in recent years that has led it to reach levels never seen before, above $11,000 per ton. The appetite for the metal is enormous, since it is key to the energy transition, and this is combined with scarce production that is suffering from the lack of new sources of supply. These arguments, however, are reminiscent of those that drove up the price of lithium and rare earths in 2022, and which, today, have proven to be exaggerated. The supply deficit that was expected has finally not been such, as the industry encountered a reality that was not what was expected: less demand, and a supply that has been more solid than expected. In the case of copper, the market exuberance may also have gone too far, both on the part of supply and demand, and the consensus of analysts expects prices to moderate over the years from current levels. , until reaching $9,000 in 2028.
There are arguments that may lead one to think that the increases in the price of copper in recent years, which have led it to reach record prices, may be exaggerated. While it is true that the supply of the metal is scarce, and that the industry had rested on its laurels in the years of low prices and no large production projects were planned, Analysts expect that the price of the metal will moderate little by little from current levels and there are some reasons that explain these estimates.
In the same way that the lithium price index multiplied by six times in less than two years, between 2021 and 2023, to then sink and practically return to square one, copper may be suffering a similar fever, at least in regarding consumer expectations. Many analysts highlight the increase in demand that will be associated with the energy transition process towards green energy, largely due to the electrification of the mobile fleet, which will be very copper-intensive, but there are those who warn that the market may have gone too far. far away, just as has happened to lithium and rare earths.
One of the arguments in favor of analysts’ estimates of price declines is the possibility of using alternative metals as a driver. Copper is an optimal metal for this, yes, but it always depends on the price and, for example, aluminum can be a viable alternative, being a good conductor of electricity, and now it is listed at $2,676 per ton, 4 times cheaper than copper, on the London Metal Exchange.
Javier Blas, Bloomberg opinion columnist, and head of the agency’s energy correspondents until 2022, highlights several arguments, on the demand side, that lead him to warn of excessive exuberance in the copper market, at a time when it seems that everyone, whether analysts, funds, investors, or mining industry executives, seems aligned with the doomsday message for metal prices. According to Blas, “current demand is weak”, largely due to the weakness that its main consumer is showing: China. “The country accounts for half of world consumption, and its real estate sector, a large consumer of metal, is stagnant”says Blas.
Furthermore, it adds an element that is closely related to the collapse that the price of lithium ended up suffering in 2023: demand expectations inflated by the idea that the energy transition will be carried out at an increasingly unrealistic speed. Demand for electric cars, for example, is not as strong as expected, and this could bring back to reality those who trust that zero emissions targets will be achieved on time.
Blas highlights how the analysis firm CRU Group manages a forecast of copper demand of 35 million tons by 2050, well below the levels expected by other analysts, such as S&P Group, which expects 50 million tons of demand for that same year. In his opinion, the US agency would be assuming that the world will be able to achieve the zero emissions goal for that year, something that does not seem to be able to be achieved.
The impact of new technologies on supply
Although expectations for copper may have been exaggerated, it is undeniable that the transformation process of the energy industry towards one focused on renewable energy has turned copper into the fashionable industrial metal. The electrification of the vehicle fleet, in addition to all the energy transport networks that are necessary to connect renewable sources with the system, have boosted the metal demand forecast for the coming years to 36.6 million tons in 2031, according to McKinsey calculations, a level that could be excessive, exceeding even the CRU estimate for 2050.
However, even with such a high copper demand projection, which leads the consulting firm to predict that In seven years the copper deficit will be 6.6 million tons, There is hope that this gap can be covered, and not only because of the boost that production may experience thanks to high prices, which will encourage the search for new mines: technological advance has another key to unblock the problem of copper shortage, and There are four specific projects with the capacity to increase supply by 7.9 million tons, according to McKinsey forecasts, something that would cause the market to recalibrate its expectations for the price of the metal.
Greater recovery of copper particles
The consulting firm explains in its report one of the keys in which the mining industry is working to increase copper production without having to explore the world in search of new productive mines. Firms in the sector are working to be able to take advantage of copper particles that, today, are unfeasible to exploit. Copper is extracted from ores, sediments that are usually made up of many minerals that companies in the sector have to separate in order to use them. In this effort, copper particles smaller than 50 microns, or larger than 150, are not cost-effective to extract.
This is where technology can turn the industry upside down: the new methods that are being developed will allow this range to be expanded, making an ore that was previously considered waste, now usable.
In this sense, the industry is working on what McKinsey calls “new grind-circuit roughing”, and they highlight a specific project, the CiDRA P29, developed by the company that bears the same name, a firm dedicated to innovation solutions for industrial processes. “The system is based on the development of a new material, which acts as if it were a sponge of copper, attracting and maintaining mineral particles,” explains the consultant. It would be something like a copper magnet, similar to the attraction process that occurs with mercury and gold, which made the former a very useful resource for mining the precious metal .
According to the consulting firm, this new method to optimize copper production can add between 1.2 and 4.6 million tons of new supply in 2031, making it in innovation with the greatest potential to increase supply among which McKinsey stands out.
In a similar way, the consultancy highlights how other systems are being developed to be able to sweep larger metal particles and separate them from the ore. The industry would be preparing new technological equipment that would be added to the machinery already in use, and with this they could increase the copper recovery rate, adding between 0.5 and 1.5 million tons by 2031.
More profitable sulfate leaching
Leaching is a technique that is based on separating the copper particles from the ore with a liquid solvent. McKinsey also highlights new developments in this technique that could increase supply in the coming years: “Flotation-based systems, in general, are profitable in ores that have a copper concentration of more than 0.25%, from which recover between 85% and 90% of the metal. Ores that have less than this percentage are usually discarded, since they are considered waste,” they explain.
This technique is also being reviewed to increase its effectiveness, and the consultancy highlights several projects, such as Nuton or Jetti Resources, that may end up generating around 2.4 million tons of new copper by 2031.
AI would also help increase production
The revolution in the development of artificial intelligence will also have applications in the mining industry, and copper production can also benefit from this new technological advance. As McKinsey explains, the development of machine learning processes has already added “another level of rigor and consistency” to the task of mining.
Mining companies use different configurations of their plants to optimize production, a very complex job, taking into account that it is based on the characteristics of the ores that are extracted, and no one is the same as another. In this sense, being able to leave this task in the hands of artificial intelligence can increase copper production between 0.9 and 0.9 million tons until 2031, another source of the metal that technological development will generate.
If all the advances highlighted by McKinsey are added, the industry will have 9.4 million tons more supply within seven years, but the consulting firm believes it is necessary to reduce these expectations, since several of these technologies could step on each other, and reduce the estimated production for that year. Hence the final figure of up to 7.9 million tons of new copper supply, an amount that, of course, the consulting firm wants to clarify: “This is an estimated total potential, it is not a specific forecast that this will happen. However, technological advances have to be recognized as part of the solution,” he says.
