Ivanhoe Founder Warns of ‘Train Wreck’ as Copper Supply Stalls

Ivanhoe Mines founder and executive cochair Robert Friedland has warned of an impending crisis if copper supply can’t keep up with demand. The world has been grappling with a shortage of copper for a couple of years, and experts predict that copper supplies will remain low throughout the year.

With the red metal playing a critical role in electrical equipment, construction and industrial machinery, a chronic shortage of copper could spell doom for the global economy, especially as it grapples with an energy crisis, a cost of living crisis and runaway inflation. The recent shortage was exacerbated by increased demand post-coronavirus as miners struggled to bring production back up to prepandemic levels.

Billionaire Robert Friedland says that a confluence of factors, including accelerated demand from the transport and clean-energy sectors, will make it exceedingly difficult for supply to keep up. Friedland noted that it is getting more expensive to locate and dig up copper deposits, increasing production costs and raising copper prices at a time when demand far outweighs the supply.

In a recent Bloomberg interview, Friedland warned that the ongoing copper shortage is pushing the world into what he called “a train wreck.” If push comes to shove, the mining executive said, copper prices could increase by as much as 10 times.

Although copper already enjoys steady demand from a variety of critical industries, demand for the metal is poised to explode over the next decade as countries transition from dirty fuels and internal combustion engine vehicles to renewable energy and electric cars. Factors such as uneven post-COVID recovery in major metals market China and high-interest rates from central banks may be restraining copper demand in the short-term, but Friedland sees the metal enjoying sustained demand in the long-term due to decarbonization, remilitarization after Russia’s invasion of Ukraine and demand from China.

McKinsey estimates that electrification alone will increase annual demand for copper to a whopping 36.6 million metric tons by the end of the decade. This will put an inordinate amount of strain on already-stretched miners and could result in a major crisis if supply doesn’t keep up with increasing demand.

Suppliers will have to deal with issues such as deteriorating ores, stricter social and environmental standards, and increased resource nationalism. Furthermore, they will have to attract plenty of new investment at a time when investors still haven’t grasped the importance of building a clean-energy ecosystem from the ground up and rarely invest in mining companies.

Current copper suppliers such as Freeport-McMoRan Inc. (NYSE: FCX) are set to reap big benefits when the supply crunch hits and prices start climbing at a fast pace.

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