The challenges green economies pose for the copper industry

The global energy transition is boosting demand for copper, generating a supply deficit in a challenging market. 

Senior executives from Codelco, Antofagasta Plc, BHP, Rio Tinto and Teck agreed at the CRU World Copper Congress in Santiago on Tuesday that the trust of society and the support of governments are essential to meet expectations.

Demand for copper is expected to double by 2050, from 25Mt in 2020 to 50Mt, driven by new decarbonization technologies, although some experts believe that figure is conservative. A further increase is assumed with the taking effect of the US Inflation Reduction Act that promotes domestic manufacturing of electric vehicles.

“It is necessary to produce 6Mt more by 2030, which implies quickly mobilizing projects and investments,” said Iván Arriagada, CEO of Chile’s Antofagasta Minerals.

However, increasing copper production has been complex. The high costs of mining inputs caused by inflation and the disruption in global supply chains due to the pandemic and the Russia-Ukraine war, are factors that have impacted the efforts.

Companies have also had to increase their investments to incorporate new technologies to improve efficiency and reduce emissions. In the case of Chile, the country also faces legislative challenges with a royalty bill being debated in congress, the rewriting of the constitution, geological issues due to the aging of mines, and a permitting system that industry players say must be improved.

"The government must work to transform the permitting system, so that it adopts a holistic view and is consistent with the need for development," said Arriagada, who added that the approval of Anglo American’s Los Bronces Integrado copper project goes in the right direction.

Given this challenging scenario, more support from governments is required, the CEOs of the mining multinationals agreed.

Political support and greater public-private participation are key to empowering the sector, said Ragnar Udd, president of BHP Minerals Americas, on the importance of raising awareness about the role that copper mining plays in green economies.

“Politicians need to understand that without minerals the energy transition cannot be achieved,” added Jeremy Weir, chief executive of commodities trader Trafigura.

Transforming mining, generating trust in society, and meeting the expectations of investors and clients are objectives in current mining strategies. But it is necessary to act quickly, since the advancement of technologies could cause deviations in the demand for the red metal, industry executives say.

“Electric cars can require up to 80kg of copper per vehicle, while a traditional one on average requires 20kg. But electric vehicles are being redesigned and we could see a decrease in copper use to 50kg,” said Vanessa Davidson, director of copper studies and strategies at CRU.

Added to this forecast is the fact that copper production has not managed to rebound worldwide. Compared to 2021, Canadian copper mine production dropped from 550,000t to 530,000t last year; in Chile from 5.6Mt to 5.2Mt; in China it was flat at 1.9Mt; and in Peru it fell from 2.3Mt to 2.2Mt, according to the US Geological Survey.

Global mine production was up just 800,000t to 22Mt, while that of refined copper increased to 26Mt from 25.3Mt.

Chile's mining minister, Marcela Hernando, highlighted the role of copper mining. "In terms of copper reserves, of the world total of 880Mt, Chile has 200Mt, accounting for 22.7%," she told the event.