For a metal with an annual turnover in excess of $200bn (£154bn), copper has demonstrated impressive volatility.
From its 2015 low of $1.65/lb to the recent high of more than $5, traders have been shipping Chinese copper to the US where The Commodity Exchange has been running out.
In 2021 a supply deficit of 441,000 tonnes, or less than 2 per cent of demand for the refined metal, caused copper to rise by 25 per cent.
Bears of the metal point to the unfinished property developments in an over-borrowed China, which produces and consumes around 50 per cent of the world’s copper.
They cast aspersions on the rollout of net-zero, which increasingly indebted governments will not be able to force upon already highly taxed electorates.
They also point to the fact that many battery-charged vehicles will have to run for well over 100,000 hours before the carbon generated in the manufacturing and mining of the extra metals required becomes truly competitive with conventional petrol/diesel engines.
They also signal to new mines coming on stream in the Democratic Republic of the Congo (Kamoa Kakula), Ecuador, Mongolia and Argentina, as well as expansions at existing mines in Chile and Peru, which between them produce 35 per cent of the world’s copper.
These new supplies will be badly needed and most of the increased production is destined for Chinese, Japanese and Korean customers. The US, despite some world-class mines, imports around 30 per cent to 35 per cent of its copper consumption.
There are newer consumers to consider. Annual copper consumption per capita in India is now close to 1kg, compared with a global average of 3.2kg or more than 7kg in China and the US.
In 2023 India consumed 1.5m tonnes, a 16 per cent increase from 2022, while China consumed 13mn tonnes.
Technological drive
Artificial intelligence and the gig economy are emerging as key drivers of growth in demand.
One gigawatt of power for a new data centre requires in excess of 25,000 tonnes of cabling. Sixteen GW of AI data centre-related capacity is likely to be added in the US by 2026, which will need 400,000 tonnes of copper, costing $3.2bn at current prices. With Microsoft reportedly spending $115bn in this space, it is insignificant.
The jury is still out on EVs but not on solar, hydropower and wind. Solar requires between 2.45 and 7 tonnes of cable per megawatt, hydro 4 tonnes, onshore wind 2.5 to 6.4 tonnes and offshore 10.5 tonnes.
While overhead high-tension cables are made from aluminium, submerged or buried cables are nearly always made from copper.
On the supply side, refined copper production has not grown much since 2016, and the aforementioned new mines are needed to replace depletion from existing mines. Global grades of copper reserves were more than 1 per cent in the 1980’s.
This figure has fallen to below 0.4 per cent, which has raised costs, as more than twice the amount of rock has to be processed for the same amount of metal.
