The Race For Copper, The Metal Of The Future

The International Energy Agency (IEA) was founded in 1974 in response to oil embargos the previous year that caused the global price of oil to surge 300% from $3 per barrel to $12 per barrel. From the start, the IEA’s mission has been to help member nations deal with major oil supply disruptions.

Over the years, the group’s purview has broadened to include more than just oil security, and in its most recent report, the IEA sounds the warning bell on the global supply of key minerals—particularly copper.

“Today’s supply and investment plans for many critical minerals fall well short of what is needed to support an accelerated deployment of solar panels, wind turbines, and electric vehicles,” IEA Executive Directive Faith Birol writes.

Many of these minerals are produced by a very small number of companies in a small number of jurisdictions. Take rare earth metals, used in everything from semiconductors to smartphone batteries. China controls between 80% and 95% of the world market, depending on the mineral.

Or look at copper. Chile and Peru are responsible for a combined 40% of global output. The largest copper mine in the world, Chile’s Escondida, is believed to have reached peak production. Meanwhile, the Chilean government has threatened to shut down the mine—57.5% of which is owned by BHP—for its water usage. Oh, and did I mention there’s a strike at Escondida?

These are only near-term risks to global supply. Looking more long-term, the risks increase and could be more severe.

Copper Supply Constraints as Demand Surges

Like gold, fewer and fewer large copper deposits are being discovered, and the time between discovery and production has lengthened over the years as costs rise. S&P Global Kevin Murphy called last decade “dismal” in terms of new discoveries. Of the 224 copper deposits that were discovered between 1990 and 2019, only 16 were found in the past 10 years. Although the earth’s surface still has an abundance of the red metal, most new deposits are of low grade.

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