The Copper Price Needs To Double
A new study from the University of Michigan is about to become a major talking point of every copper mining CEO
I was alerted to a recent University of Michigan research study by a tweet from copper mining billionaire Robert Friedland. The U of M study does a deep dive into the history of copper, and the key drivers of future global copper consumption.
The link to the full report is here.
I really like the following quote from the article:
"In the United States, from 1900 to 2000—100 years of development of the United States—we went from no plumbing to plumbing, from no electricity to electricity. Right now, for every man, woman and child in the United States, we've got more than 400 pounds of copper behind the wall," ~ Adam Simon, University of Michigan professor of Earth and environmental sciences
Professor Simon went on to add "If we look at that number globally, in places like India, it's probably at best 40 pounds of copper."
The math is straightforward: billions of people in emerging economies aspire to achieve a higher standard of living. The populations of India and Africa alone could potentially consume many years’ worth of global copper mine production as their economies modernize.
When you dig into the amount of copper supply required by 2050 the numbers are daunting. The UM report emphasizes that new porphyry copper deposits will be required to come online in order to bridge the supply/demand gap:
VMS and sediment-hosted deposits tend to host higher average copper grades. However, these deposits tend to be smaller and they are not as geologically widespread as porphyries. The problem with porphyries is primarily two-fold: 1. They tend to be low grade (~.3% copper on average) 2. They have much larger capex requirements, often running into the multi-billion dollar range.
Due to the higher capital intensity required to bring on new copper production, a significant increase in the copper price will be required to incentivize this new production to come online.
In order for global copper production to have any chance of meeting growing demand and aligning with the black dashed projections in the chart above, the future copper price must exceed $20,000 per tonne. At a price below $10,000 per tonne, we simply will not see enough significant new mines become economically viable.
Copper is the metal that touches all human lives. It is the metal of human progress. The higher the standard of living, the more copper involved in the technologies that help increase that standard of living.
As the average life expectancy in the United States increased from 50 years old in the year 1900 to 77 years old in 2000, the amount of copper consumed per capita rose from virtually zero to nearly 400 pounds:
As countries like India (1.4 billion population) and continents like Africa (1.5 billion population) enter the 21st century and build-out infrastructure, the amount of copper that will be required is nothing short of gargantuan. India will require 227 million metric tons of copper to build and modernize its infrastructure, while building infrastructure across all 54 countries in Africa will require about one billion metric tons of copper.
To put that into perspective, in 2023 global copper mining production totaled 22.2 million metric tons. India alone will consume ten years of global copper mine production in order to modernize and build-out its infrastructure.
As older mines—such as Rio Tinto’s massive Bingham Canyon Mine in Utah—become depleted and eventually close, new mines will need to come online to replace them. Meanwhile, global copper consumption continues to grow at a relatively steady annual rate of approximately 3%. Taken together, bridging the growing copper supply-demand gap will require the development of nearly 100 mega-mines over the next 25 years.
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