High Copper Prices Shine Light on $264 Billion in Mining & Smelting Projects
Research by Industrial Info Resources (Sugar Land, Texas)--There's a lot of discussion these days around the potential increase in demand for copper due to the growing energy transition buildout, such as for electric vehicles, which could require as much as four times as much copper as conventional autos. While the long-term outlook is very encouraging for copper mining and smelting companies, the challenges in meeting future demand are daunting.
In the short term, copper miners and smelters are finding it difficult to keep up with demand due to a slew of problems, including those that are pandemic-related, along with strikes at operating mines, geopolitical changes in the top mining countries, degrading ore grades and other supply-related issues--all of which have an impact on capital investment and expansion plans.
As a result, copper prices are near historic highs, currently above $4.50 per pound as miners begin a strike at the Escondida and Spence copper mines owned by BHP Group (Melbourne, Australia) in Chile. Geopolitical issues in Chile and Peru could impact the top two copper-producing countries and threaten future copper supply, causing more price volatility.
Miners may find it difficult to ramp up copper production in time to meet the expected jump in demand. Richard Adkerson, chief executive officer for Freeport-McMoRan Incorporated (NYSE:FCX) (Phoenix, Arizona), said recently in a Bloomberg interview that there are few new copper discoveries at a time of rising demand, which only will increase with decarbonization efforts: "Copper faces a supply scarcity that will require both substitution and increased recycling, Adkerson says, adding that even if prices were to double tomorrow, Freeport would be unable to bring on new supply within five years."
But the projected shortfall is not for a lack of copper-mining projects. Globally, there are more than 1,300 copper mine and downstream copper smelter and refining projects, totaling $264 billion, according to Industrial Info's Global Market Intelligence (GMI) Metals and Minerals Project Database.
Copper-mining projects account for 81% of the total number of projects and more than 90% of the value.
There are 255 copper smelting and refining projects, which make up about 19% of the number of copper-related projects, and amount to $26 billion in value. For copper-smelting projects, about 55% of the value is for those at operational facilities, and include in-plant expansions, additions and modernizations. The remaining 45% is for grassroot smelters. Most of the copper-smelting projects are in Asia -- mainly China, Indonesia and Mongolia.
"I think the projects are there," said Joseph Govreau, VP Research Metals & Minerals for Industrial Info. "It's just a matter of getting those projects permitted and funded, which is a slow, laborious process taking years and sometimes decades."
Global mine production was about 20 million tons in 2020, down from 20.4 million tons in 2019, according to the U.S. Geological Survey (USGS). Production appears to be recovering this year as operations ramp up from pandemic lockdowns and new capacity is brought online.
Ivanhoe Mines Limited (Vancouver, British Columbia) recently started commercial operations at the Kamoa-Kakula mine project in the Democratic Republic of Congo. The $500 million underground mine and concentrator will have a 3.8 million-ton-per-year mill capacity and is expected to produce 200,000 tons per year of copper concentrate. Subsequent phases will expand the mine to produce 800,000 tons per year of copper concentrate.
This is one of a number of projects globally that are expected to be brought online in the next few years. Currently, there are 140 projects totaling $47.24 billion under construction and expected to be brought online between now and 2024.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.