Copper Markets in Transition: Closer Collaboration between Mine Operators and End Users Expected

The world's largest copper producers are forecasting closer collaboration with end-users such as automakers and energy providers to reform the highly fragmented supply chain. Given the impending shortages of the metal essential for green technologies, direct agreements between mine operators and major buyers are expected in the coming years to ensure an affordable copper supply. Executives from leading mining groups observe increasing signs of a shift towards direct deals with cable manufacturers and other large buyers to secure the supply of the "metal of electrification." Jonathan Price, CEO of Teck Resources, a Canadian copper and zinc producer, emphasizes that investors are increasingly interested in access to copper needed for charging stations, grid expansion, and vehicles. The failed £39 billion takeover attempt of Anglo American by BHP, as well as the rise in the copper price to an all-time high of over $11,000 per ton earlier this year, have highlighted the expected copper shortages in the coming decades. Although the demand for renewable energy, grid upgrades, and electric cars continues to rise, building new mines is becoming increasingly challenging. Bank of America forecasts that the copper supply will be about 15 percent below the demand by 2030. It predicts that the global annual copper demand will grow from a historical 2 percent to 4 percent due to the expansion of renewables, grid infrastructure, and electric cars. A combination of deteriorating geology, longer permitting times, and rising costs due to inflation and sustainability concerns is blocking the construction of large projects. Investors are demanding payouts over growth, and copper prices are too low to make life easier for mine operators. Tristan Pascall, CEO of First Quantum, whose massive mine in Panama was shut down by the government after protests, notes that there are no longer any easy legal jurisdictions globally. The discussion is whether mine operators should consolidate into "supermajors" or be more open to partnerships to execute complex, multi-billion dollar projects. Increased integration of the supply chain could be another way to address the concerns of end-users who fear higher prices from consolidation and takeovers by giants like BHP, Glencore, Freeport-McMoRan, and Rio Tinto. So far, there is only one significant financing agreement for copper between an automaker and a mine operator, with Stellantis making a deal with McEwen Copper. Paul Gait of Anglo American sees greater customer involvement, similar to that with battery metals, as a future development for copper. For developers of renewable energy projects and EV manufacturers, volatile commodity prices can mean the critical difference between success and disaster. Nexans, the world's second-largest cable manufacturer, is a frontrunner in supply chain integration and owns its rolling mills, countering the anticipated shortages. Not everyone shares the bleak forecasts. Some experts are convinced that the global copper market, at 25 million tons per year, is sufficiently liquid to not require direct intervention. Nonetheless, most analysts and executives agree that the projected copper shortage is due to years of underinvestment in exploration and development. In summary, experts expect the world to face severe copper supply shortages, as it is not easy to expand production capacity in the short term.