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The Looming Copper Supply Crunch

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The Looming Copper Supply Crunch

The Looming Copper Supply Crunch

This infographic is presented by Western Copper & Gold

Copper is among the three most used metals in the world, and high quantities of the red metal must be mined every year to meet global demand.

The market for copper is equal to approximately $120 billion each year, which rivals that of even iron ore, the most widely traded metal. This is because infrastructure, technology, and automobiles consume massive amounts of copper.

Behind silver, copper is the second best metal for conducting electricity. That’s why 75% of copper is used in electrical wires or for wiring in machinery. From power grids to motherboards, copper wire is indispensable to modern society.

Copper is also essential for green energy and a sustainable future. For example, each generation of car needs more copper wiring: a gasoline-powered car needs 55 lbs, while hybrids and electric vehicles need 110 lbs and 165 lbs respectively. Further, it is estimated that an average of 3.6 tonnes of copper is used for each MW of wind power.

The Copper Supply Problem

The problem is: copper is not being discovered fast enough to meet upcoming demand. A study by Wood Mackenzie found that there will be a 10 million tonne supply deficit by 2028. That’s equal to the annual production of the world’s biggest copper mine (Escondida) multiplied by a factor of ten.

There are several reasons for this.

First, it now takes longer to go from discovery to production than ever before in the mining industry. Geological, environmental, and political challenges have brought the average lead time to around 20 years for new mines.

Beyond all of the challenges above, the economics also have to line up. Thomson Reuters GFMS estimates that for new copper supply to be incentivized to come online, the copper price must be $3.50 per pound.

Copper mining is all about grade or scale. The majority of global output comes from mega mines that have massive economies of scale to reduce costs. However, it has been a long-running trend that the grades for these established mines are dropping.

A good example of this is Escondida, the world’s largest copper mine which is located in Chile. It produced 6% of global copper output in 2014, but the mine is facing a similar problem to that of other large copper projects: grades are dropping. In 2007, the copper grade was 1.72%, but it is predicted to drop to half of that in upcoming years. In fact, BHP Billiton is expecting a year-over-year decline of 24% between 2015 and 2016.

Codelco is the world’s largest copper miner overall, and has recently announced a $25 billion investment plan to expand aging mines. It will spend $5 billion each year, but it expects no significant gain in production for its efforts.

The Coming Supply Gap

Add these factors together, and stocks of copper are at their lowest levels since 2008. Further, 4% of the world’s copper mining capacity falls off the table each year, which means that this must be replaced somehow.

With 10 Escondidas needed to fill a 10 million tonne supply deficit by 2028, metals investors need to stay vigilant as changes in the market will be coming.

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Mining

Visualizing Raw Steel Production in 2023

China produces more than half the world’s steel.

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Voronoi graphic showing top raw steel producers in 2023.

Visualizing Raw Steel Production in 2023

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

Steel is essential for the economy due to its crucial role in infrastructure, construction, manufacturing, and transportation sectors.

This graphic breaks down the estimated global production of raw steel in 2023. The data was sourced from the U.S. Geological Survey as of January 2024.

China Produces More Than Half the World’s Steel

One major issue facing the steel industry is overcapacity in top producer China.

Steel production in China has surpassed demand in recent years, leading to downward pressure on the profit margins of steel mills worldwide.

Historically, China’s troubled real estate sector has accounted for over one-third of the country’s steel consumption. To address this issue, the Chinese government has mandated steel production cuts since 2021.

Far behind China, India is the second-biggest producer of steel, followed by Japan.

CountryRegion2023 Production (million tonnes)
🇨🇳 ChinaAsia1,000
🇮🇳 IndiaAsia140
🇯🇵 JapanAsia87
🇺🇸 U.S.North America80
🇷🇺 RussiaEurope75
🇰🇷 S. KoreaAsia68
🌍 Rest of World420
Total1,870

Infinite Recyclability

Steel is an alloy primarily composed of iron ore containing less than 2% carbon, 1% manganese, and other trace elements. It is 1,000 times stronger than iron and can be recycled over and over without sacrificing quality.

Steel is widely used in various industries. It is a fundamental material in construction, providing support through beams, internal structures, and roofing.

Moreover, steel’s corrosion-resistant properties make it ideal for water infrastructure. Stainless steel pipes are the preferred choice for underground water systems, ensuring longevity and purity in water transportation.

Additionally, most canned foods are stored in steel containers for preservation, as steel does not rust.

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