latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/copper-supply-faces-struggle-to-keep-up-with-growing-demand-60471925 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Copper supply faces struggle to keep up with growing demand

Greenhouse gas and gold mines Nearly 1 ton of CO2 emitted per ounce of gold produced in 2019

Essential Metals & Mining Insights - September 2020

Essential Metals & Mining Insights - August 2020

State of the Market: Mining Q2-2020

Copper supply faces struggle to keep up with growing demand

A deficit in the copper market is set to deepen over the next several years as supply of the widely used metal struggles to keep up with strong demand from the power and construction sectors, compounded by the proliferation of electric vehicles.

"Refined output is expected to increase by 4.3% year on year to 24.7 million tonnes in 2021 after decreasing by 2.1% to 23.6 Mt in 2020, primarily as a result of disruptions caused by the coronavirus pandemic," S&P Global Market Intelligence commodity analyst Thomas Rutland said.

Work stoppages due to measures designed to curb the spread of the coronavirus have stalled existing capacity and have delayed investments with long-term repercussions for supply. Chile has been the worst affected followed by the U.S. and Peru.

The second quarter bore the brunt of disruption to refined and mined production, but global output should be similar to 2019 levels in the third and fourth quarters, according to Rutland. "Beyond 2020, we forecast that consumption will outstrip production over the period to 2024, resulting in a growing refined market deficit and increasing copper prices."

"Refined production output will be hindered during this period by slowing mine production growth rates unless there is significant investment in the copper project pipeline," Rutland added.

Fitch Solutions expects the copper market deficit to ease from an estimated 416,000 tonnes in 2019 to 299,000 tonnes in 2020 before widening again from 2022, according to a mid-September report. The analytics provider forecast a shortfall of 489,000 tonnes in 2024, rising to 510,000 tonnes in 2027.

SNL Image
Production from the world's largest copper mine, BHP Group's Escondida in northern Chile, is expected to tumble by between 13% and 21% in fiscal 2021 as grades decline.
Source: Oliver Llaneza Hesse/Hulton Archive via Getty Images

As of late September, 2.9% of annual global supply remained suspended due to the pandemic, with Chile and Peru accounting for more than half of the missing 702,000 tonnes of output estimated for 2020, VTB Capital analysts wrote in a Sept. 28 note. In the U.S., 217,000 tonnes of capacity was shuttered, according to the Russian government-controlled bank.

This leaves miners playing catch-up to develop future supplies of the metal as demand was only mildly impacted by the downturn caused by the pandemic. The price of copper has climbed 6.9% since the start of 2020, defying a massive slump in March, and stood at US$6,574 per tonne as of Sept. 29.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

A rising tide of electrification, as many countries seek to lower their emissions through developing new technologies, promises robust demand for years to come. Global copper production would need to rise by between 3% and 6% per annum by 2030 for countries to meet the targets of the Paris Agreement on climate change, according to a Sept. 14 Bernstein Research note. At the same time, rising environmental standards will likely create headwinds for mining companies.

Fitch expects mine output to rise at an average annual rate of 3.2% from 2020 to 2029, from 20.4 Mt to 27.7 Mt, while Bernstein identified 11 reasons copper supply could disappoint and warned that consensus forecasts overpromise and underdeliver.

New mines needed

The expansion of existing mines accounts for the majority of new copper production scheduled to come online by 2024, after which new projects will be required to bridge the growing gap expected by analysts. However, this will require significant investments amid a strong performance from other commodities during the pandemic, most notably gold.

Some copper projects benefit from the output of valuable byproducts. Revenues are chiefly bolstered by gold and molybdenum, followed by silver and cobalt, according to Market Intelligence commodities analyst Gregory Rodwell.

Copper is not only vital to all types of batteries but also to other components of electric vehicles, such as motors and charging equipment, Bernstein noted. Thus, copper is expected to dominate the surge in demand for battery metals by volume over the coming decades.

Following a "poor decade" of exploration for the industry, BHP Group expects a dearth of high-quality development projects to support prices in coming years as grades decline, resources are mined and input costs rise, according to the company's fiscal 2020 annual report released in mid-September.

Exploration lagging

In terms of exploration budgets, copper was the worst-performing commodity in 2020, according to Market Intelligence mining analyst Kevin Murphy. "While exploration for all commodities was impacted by COVID due to lockdowns and other restrictions, the steep copper price drop in March saw a lot of caution enter the exploration sector," Murphy said.

"Most companies were budgeting for a longer recovery in price than what occurred. So while copper prices recovered well, and quite quickly, copper budgets did not," Murphy explained. "That said, we do expect copper to erase the losses of 2020 in 2021 as delayed and deferred programs run over into the new year."

Looking at the shorter term, demand from China's end-copper consumers took an unexpected slip in September, according to Shanghai Metals Market. Its purchasing managers' index covering the country's construction, power, electronics, transport and home appliance sectors dipped 0.48 of a point to 49.58 in September as compared to August.

The reading is likely to tick up by 0.68 to 50.26 in October as overseas demand improves with the approach of the Christmas holidays, Shanghai Metals Market said.