Future prospects of the copper market
Copper is highly heralded as a flashing sign of inflation and global economic stability to the point that myriad investors assess the inflation rate to decide when to purchase copper, as the copper market analysis reflects the overall trends of economic development.
Copper has widespread uses in some of the most influential sections of the world’s economy, including the sectors of property building and construction, industrial manufacturing, auto companies, and power energy sources, just to name a few.
On top of that, copper is widely revered for being the cornerstone of the transition to sustainable energy sources, primarily in light of its remarkable conductivity of heat and electricity in comparison to other non-ferrous metals.
Hence, with copper transferring a greater deal of electrical currents when compared to other valuable metals, it is no wonder to see it play an indispensable role in building the infrastructures of a greener future ahead, especially in the industries of electric vehicles batteries, solar panels, wind turbines and other areas related to sustaining energy sources.
But it seems that in our current electrified world, the precious red metal can not last forever as the gap between its supply and demand is becoming ever widened with the copper commodity going up high in price.
As long as the current needs for copper in industrial sections are in their place and the rising demands for copper in fulfilling the goals of net-zero emission continue to grow, a large deficit in copper supply is expected to happen in the near future.
The gap between copper supply and demand is assumed to be so much wide, that it would not be filled with copper alternatives like aluminum or even with recycled copper scraps unless significant investments come online in due time to increase copper supply by solving the problems of the copper mining industry.
For further elaborate details, facts, and figures about the future prospects of the copper market in the world, stay tuned until the end.
Future prospects of the copper demand by industry
The ongoing imbalance between global copper demand and supply, which is expected to start in the second half of this decade, may have massive repercussions for the world economy while it might even delay fulfilling the goal of Net-Zero Emissions until 2050.
The real nub of the matter is that, compared to their typical fossil fuel-based alternatives, energy transition technologies like electric vehicles, charging equipment, solar PV, turbines, and battery packs all need a substantially greater deal of copper.
The quick, widespread implementation of these technologies, especially EVs across the world, would greatly increase the consumption of copper. This tendency will be even accelerated by significant electrical grid-supporting investments.
The copper demand is expected to increase steadily in plenty of other economic areas, many of which are not actually associated with power generation yet are essential to the eventual development of the economy.
By 2050, the global consumption of copper would surpass double the amount of its current quantity as a consequence of both the conventional developments and the increase associated with the power transition.
To be specific, the demand for copper is estimated to increase from its current level of 25 MMt to around 50 MMt by 2035, a record-high level that would be retained and rise further to 53 MMt by 2050.
In other words, realizing the target of Net-Zero Emissions of 2050 would not be feasible unless an 82% surge of copper demand takes place by 2035, as energy sources and manufacturing industries would employ the copper metal on large scales.
As shown in the figure below, as long as copper usage by industry is concerned, it is predicted that the section of manufacturing autos will employ over 250% extra copper by 2030 only to charge electric vehicles since they require almost four times of copper used in ICE transport systems.
That is the reason why this section is set to be the greatest stimulator of copper demand in 2035, as the amount of red metal consumed associated with this sector would rise up to 9.3 MMt/y in 2035 from 2.2 MMt/y in 2021.
The amount of copper demand for transportation and distribution of electricity (T&D) is expected to increase from roughly 4.7 MMt/y in 2021 to 7.5 MMt/y in 2035, making it the next biggest copper consumer industry.
The traditional significance of copper is likely to uphold the development of the foundations for the transmission and distribution of electricity, which is primarily pushed by copper requirements for converters.
Last but not least, the need for copper in solar panels, turbines, and charging infrastructures in the energy generating segment would soar from 0.6 MMt/y in 2021 to 3.7 MMt/y in 2035, which has a lower actual quantity contribution but has relatively the quickest rate of progress generally.
The United States, China, and Europe will see the greatest increases in demand for this power transition. Likewise, India will experience rapid growth in its demand for copper, though primarily for its usage in conventional domains.
Future prospects of the copper demand by region
The driving force of the global copper market is China. As the world’s biggest single copper consumer country, it will continue to play a significant role in the market for the coming centuries.
Despite going on to rely heavily on thermal sources of energy, particularly coal, the government of China is supporting the development of new sustainable energy infrastructure.
The 14th Five-Year Plan (FYP) and the latest release about their carbon neutrality objective by 2060 have greatly accelerated the development of green energy sources and low-emission vehicles with an emphasis on the security of energy sources as well.
Whereas around 35% of the built non-hydro clean energy capacity was in China at the end of 2021, both in terms of local none industrial and industrial-related capacity, it still serves as the primary driver of the increase in global copper demand.
Furthermore, China presently manufactures almost 80% of the world’s solar PV cells and modules, highlighting its paramount importance in power transition technology.
In the automotive section, China has encouraged the development of its EV industry through a range of legislation and subsidies. Even today, China produces more than half of all EVs produced worldwide.
Even the world’s biggest battery manufacturer, CATL, is based in this country, as it boasts the largest supply chain for EVs. To further boost this advancement, it keeps taking important regulatory reform measures, such as China’s flourishing exportation of electric vehicles.
The other major contributor to the copper market will be from Europe, the US, and, to a smaller degree, India. By 2035, these three nations, along with China, are anticipated to account for over 70% of the world’s copper demand for the usage of sustainable power transition.
Since the 2000s, European nations and the European Commission have prompted aggressive carbon reduction targets. Europe is not only ranked second to China in terms of copper consumption for energy transition uses, but also it is set to be crucial in maintaining copper supply.
This decade will observe a sharp rise in demand for copper in the United States due to the country’s goal of having 100% green electricity by 2035, as well as the increasing electrification of its vehicles.
By 2030, India wants to have 450 GW of deployed sustainable energy capacities. Considering that the country is still largely relying on thermal sources and coal at the moment, it will remain dependent on coal-fired sources in addition to renewable energy sources to meet its rising electricity demand.
India is one of the countries with the lowest light-vehicle usage rates in the realm of transportation. The government is encouraging the growth and adoption of electric vehicles, even if their volumes will be far smaller than the amount in China, the US, or Europe.
It is predicted that by 2050, the population of Africa would become doubled and there will be 2.5 billion people in Africa, which comprises 25 percent of the world’s population.
So the primary emphasis in this continent will be on economic development. With the light Up and Power Africa program being launched as a result of the New Deal on Energy for Africa, which the African Development Bank sponsors, Africa is set to undergo a significant breakthrough toward having an electrified world.
Future prospects of the copper supply
So far, it has been self-evident that the surge in demand for copper would occur even in a world that has not utterly fulfilled the net-zero targets, let alone a society that has completely transitioned to zero emissions.
This means that as the conventional needs for copper keep on increasing, the world has to cope with considerable challenges in the upcoming decades.
Realizing the goal of having a green future by 2050 necessitates about double the amount of copper supply in the world by 2035. This is while the current copper extraction projects would fall short of satisfying such enormous demand.
Therefore, any advancement toward reaching the objective of net-zero emissions calls for conspicuous consumption of red metal, making it binding to have new supplies of copper as early as possible.
When it comes to global copper production on the supply side of red metal, here there are two scenarios to predict future trends.
The Rocky Road Scenario is based on the facts of the current global economy, with all the issues and difficulties that loom ahead.
More specifically, in the Rocky scenario, the continued maximum exploitation and recycling at the current typical rates would be reinforced by the ongoing operational and financial problems that are common today.
Here, the yearly supply deficits would approach 10 MMt in 2035, which is a substantial volume that the market will be forced to manage with unanticipated disruptions on both the supply and demand sides.
In this case, a bigger gap would occur in less than no time as there would be a severe deficiency starting in 2024.
The 2050 objective for net-zero emissions will be postponed further in the future if the significant gap between supply constraints and demand expectations would not be filled, particularly between 2025 and 2035.
However, the High Ambition Scenario, which is a very idealistic scenario, relies heavily on improvements in maximum exploitation and rates of recycling.
Under this scenario, the production of refined copper will rise from 24.5 MMt in 2021 to above 47 MMt in 2035.
Accordingly, there would be ongoing shortages of copper between supply and demand that would be started in 2025 and extend through the majority of the 2030s, with a shortage of more than 1.5 MMt in 2035.
This hypothetical assumption implies that even in the best-case scenario of what would occur for copper extractions and processing operations, there won’t be a sufficient amount of supply to satisfy the demand generated for Net-Zero Emissions by 2050.
Presumably, neither of the scenarios premised the expansion or development of new mines, which might accelerate the increase of extra capacity.
Without a significant policy change, nonetheless, legal and authorization obstacles, together with lengthy wait times for new mines to open, will likely slow the rate of supply growth.
The difficulties will be exacerbated by the world’s geopolitical, economic, and perilous conditions at the local levels.
Among some of the most notable instances of such challenges, one can suggest the effects of US-China rivalry on copper market trends as China is set to be the main supplier of refined copper across the world, while the US would meet half an amount of its own demand by imports.
Likewise, the Russia-Ukraine war has incurred irreparable damages to the security of energy in the world, postponing net-zero targets to further future, especially when the demand and supply chains of the copper industry in 2022 have proved to be very vulnerable on account of disrupted commodity markets across the world.
Besides, there is the possibility of a substantial, systematic rise in copper prices if the gap between supply and demand becomes widened, which may have a disruptive effect on world markets and industry.
Despite the fact that generally higher prices of copper might stimulate foreign investment in new capacity, authorities in countries that are on the supply side of copper will be inclined to increase their shares of revenue, just like what is happening in Peru.
Be that as it may, with the help of new technologies, a cleaner copper exploration and processing would be possible as this would solve a number of the major issues that are now contributing to the imbalance between supply-demand, such as the copper industry’s own carbon emissions and the potential to obtain permission for new projects.
Such innovations that would be conducive to more effective copper use, recycling, and the substitution of alternative metals that can lower the current demand forecasts, would also be crucial in partially closing the gap.
In turn, this will necessitate the emergence of empowering investments and a set of regulatory frameworks to encourage innovation and boost the production of the vital minerals required to fuel these new technologies.
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