During its latest investor update, Glencore stated that it expected to see a big shortage in copper soon. This deficit has also been pointed out by other industry players, with the multinational commodity trading and mining giant noting that a copper supply crunch could slow the clean energy transition.
Glencore CEO Gary Nagle stated in the company’s presentation that while commodity shortages were looming, the current price was not reflecting this change.
Based on the International Energy Agency’s net-zero emissions pathway, the mining company estimates that between 2022 and 2030, the world will be more than 50 million tons short of the red metal.
Nagle then noted that increasing supply from mines was also difficult, given the heightening operational and country risks, adding that the industry was also cautious of multibillion dollar investments.
Plans are underway to expand Glencore’s copper portfolio through a new project located in Argentina, dubbed El Pachon.
The mining company also cited estimates from Wood Mackenzie in its presentation, stating that in 2025, the copper industry’s expansionary capex would reach $12 billion globally. This figure represents a more than 60% decrease from its $32 billion peak, which was recorded in 2012.
The International Energy Agency has, for years, stated that increasing the deployment of clean energy will lead to a significant increase in the demand for critical minerals such as lithium, copper and nickel.
The agency estimates that by 2040, the demand for minerals will be dominated by nickel, copper and graphite, noting that the rising need for grid expansion will also cause the annual demand for aluminum and copper to double during this period. It also expected that in the same period, mineral demand from electric vehicles and battery storage will grow exponentially, with lithium seeing the fastest growth rate.
Last week, Goldman Sachs stated that the price of copper was set to hit a new high in 2023 as the market tightened. The global investment banking, securities and investment management company expects that next year, the price of copper will reach new records, surpassing its 2022 record of $10,845 per ton. This forecast led the company to raise its 12-month price target for the red metal from $9,000 per ton to $11,000 per ton.
A metals strategist at the investment management company Nicholas Snowdon explained that minimal supply response alongside an increase in commitments and policy targets to ensure a smooth green transition have caused bigger open-ended deficit conditions. These could push prices higher, to the benefit of the shareholders of major producers such as Southern Copper Corporation (NYSE: SCCO).
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