Demand for copper will continue to grow, and Latin America will play a more important role with China’s participation expected to decline.
Latin America provides about 25% of the important metals for the global market, and copper is the number one commodity. But to achieve net zero by 2050, regional copper production – and recycling – must increase, according to a report by Latin American energy organization OLADE.
On the sidelines of the World Copper Conference, hosted by consultancy CRU in Santiago, BNamericas spoke with Colin Bennett, Market Intelligence Director at the International Copper Association, to find out more about the impact of Chile’s production decline and the closure of Copper Panama, where as well as Africa’s industry.
American names: What are the key copper products required for the global energy transition by 2050?
Bennett: there There’s a lot of demand around the transition to green energy and from things like renewables, electric vehicles, and electric vehicle infrastructure. But power grids are growing a lot. Currently, global demand is about 200 thousand tons, which will grow to about 2.2 million tons per year in 2040. This represents growth at a CAGR of 19%.
China is building a lot of grids, and this kind of growth will trickle down to countries where they have to build renewable energy grids. This will grow massively. This is very good for copper because new power cables are needed in new equipment.
These are big growth areas, and traditional markets like plumbing won’t grow as much, but they will be fairly stable.
American names: What is the impact of the recycling industry on the copper market?
Bennett: if There is a demand of 30 million tons this year, and 10 million tons will come from recycled materials. Copper is used in buildings, homes and mobile phones. On the one hand, it is used for 60 or 80 years and on the other hand for a few years. There is not a lot of recycled material coming back. It’s not like aluminum or other fast-moving metals.
Everyone wants recycled materials too. Authorities have put in place regulations for recycling vehicle batteries, and this could be a recycling success story. But the reality is that you need to meet two-thirds of demand through raw materials, such as mining.
American names: How long will it take for recycled materials to become important?
Bennett: It will probably take a very long time because you need the resources to recycle, and everyone needs to recycle. Combining these two things is difficult because no one wants to invest in capacity if there is not a guaranteed flow of recycled materials. It requires general change.
All our old cell phones should be entered. But the collection and sorting of items that contain copper within them must also be improved. Everything you can think of that contains copper needs to be collected and recycled.
the [original equipment manufacturers]For example, car manufacturers want to source recycled materials for the copper elements used in the car. Trying to meet that [demand] It is a big challenge. For some things, you can do that, but for most things, you can’t do that because you only have a certain amount of recycled material coming in. So not everyone can get the recycled materials they want.
American names: Since Chile is the world’s largest copper producer, how much did the decline in its copper production last year affect the market?
Bennett: In the mining industry, the balance is usually fine at the end of the year. So, there may be a decline in the first quarter, but in the fourth quarter, it flattens out. There is a certain reliability to the show. I don’t think there’s ever been a year where there were such big numbers stuck. [Chile’s] Still producing as much as you can.
There are capacity increases and planned capacity increases. Even workforce problems tend to last only a short time. It is a fixed and long-term market.
American names: What do you think about the closure of the Panama Bridge mine?
Bennett: It’s the wrong direction, but the market will embrace it. There will be more demand from elsewhere to fill the gap. And then, I suppose, we just have to wait until the issues in Panama are resolved, and they will come back in the future.
In the long run, this is probably good. A return would only enhance the show, even though it’s a very big one. After that, miners get their chance to roll out their normal strategy.
American names: The Democratic Republic of the Congo is increasing its copper production, moving closer to Peru as the world’s second-largest producer.
Bennett: Much of Africa is a growing powerhouse, but it needs copper infrastructure to generate electricity, and that comes through mining, which also generates money internally. There is a lot of market research or market information that needs to be done to understand the African market.
China is heavily involved in production across Africa. They have made significant investments in Africa’s growth. It’s a tough market that way.
We are moving forward decisively because copper is actually a strategic material that must be exchanged between countries in Europe that do not have copper mining. There is no critical element like closing borders and consuming your quantity.
Africa has a lot of artisanal mining going on, which is something they will have to clean up if they really want to operate on a global scale.
But there is no shortage of copper. We have not reached the point where copper has become scarce. This may be partly because governments have not invested enough, for example, in renewable energy and electric cars. It’s more about business deals. There are problems and closures, but in the end, the market balances itself out one way or another.
American names: How real is the threat posed by aluminum as an alternative to copper as a conductor of electricity?
Bennett: Replacement represents about a quarter of a percent of the copper market. It’s probably 200,000 tons a year, and the market is about 30 million tons, so it’s really small.
There was no significant change in materials. The only example of a consistent change in copper is when plastic pipes came to replace copper pipes. Therefore, the copper plumbing pipe market has taken a hit due to the new technology. But there aren’t any new technologies that are surprisingly better than copper. Copper is still the material of choice.
On the other hand, there is also minimization, where society wants everything to be smaller so that it can use less materials.
American names: What do you think about Copper mining in Latin America in relation to supply and production growth?
Bennett: Any new produce that comes to the market is a good thing as long as it is responsibly sourced. But, for example, the volume of production from Africa is still relatively small, but the growth rate is higher. So, it contributes a lot.
In Chile and other countries, it is very difficult to expand mines or even obtain licensing licenses. Therefore, any production is welcome. Governments need to be more committed and consistent so that miners can make significant investments, but ensure that in the future they will not face problems in expanding mines and integrating technologies.
American names: What is the outlook for copper prices in the short or medium term?
Bennett: I can’t speak for the price. But what I can say is that nowadays, for example, if you have an offshore wind system, the important element is no longer the cost but how efficient it is. Cost is now not the main driver for copper replacement. Price is important, but it falls somewhat halfway between the importance of drivers.
When you create systems, you cannot skimp on materials because they need to be as efficient as possible. This doesn’t mean that copper can’t replace something in some designs, but the consideration isn’t really about cost.
Basically, it’s about efficiency and longevity. Wind turbines last about five years. You might say that you need really reliable undersea cables so you don’t have to touch them. So I chose copper. It’s this kind of thing that drives the market rather than the really low relative material cost.
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