It’s straight out of a James Bond film. An evil mining magnate called Dr Copper undermines humanity’s attempt to save the planet from carbon dioxide. But it just might happen. Well, sort of…
Dr Copper is the apocryphal name given to…well, copper. That’s because it has a PhD in economics and can therefore predict economic trends. Which is a bit ironic given the predictions track record of actual people with economics PhDs. But I’m sure you get the idea.
When the copper price is going up, the economy is about to boom. If the copper price falls, look out below the economy too.
This rather simple idea has a surprisingly decent history at predicting economic trends. Probably because large companies often buy copper in advance of actual delivery, so the copper price reveals large companies’ investment plans for the future.
How does this make Dr Copper a Bond villain intent on ruining our attempt to save the planet from CO2? Well, there just isn’t enough copper to save the planet. And the copper price is going to moonshot to the extent that we even try, making net-zero impossible financially as well.
This probably seems like a big claim. And you might be wondering how governments and experts could’ve overlooked the rather important question of securing enough metal to electrify everything, roll out enough renewables to power the planet, and upgrade the grid to move electricity around.
And you can join the queue of those wondering how this was ignored. But they did just that, no doubt about it.
Ever since committing to net zero, a long list of people have been doing the maths on what it actually means. I’ve interviewed three of the most prominent over the past two weeks. And the common concern they have for net zero is the lack of copper to make government plans a reality. Heck, even the economists have figured it out.
A 2022 report by S&P Global pointed out that ‘Unless new supply for “the metal of electrification” comes online in a timely way, net zero emissions by 2050 will be short-circuited and remain out of reach’.
And even the media is aware of this challenge. ‘Will the shortage of copper derail the energy transition?’ they ask in several articles on the topic. And the answer given is usually a reluctant ‘Yes’.
How big is the challenge?
The following two tweets put the challenge into perspective:
‘Brian Gitt
‘Humans mined 700 million tons of copper over the last 5,000 years.
‘The same 700 million tons will need to be mined over the next 27 years to meet 2050 energy transition targets using wind, solar, & electric vehicles.’
AND:
‘John Lee Pettimore
‘$6.7 trillion invested in #GreenEnergy since 2004. To continue this green dream the world will need 10 million tons of new copper supply over the next decade, or the equivalent of a new Escondida copper mine, the biggest in the world, into production every year.’
Speaking at the 2021 GeoConvention: ‘Mining for Net Zero: The impossible ask’. Geoscientist Alan G Jones pointed out that copper production would have to increase by 50% by 2050 and 25% by 2030 if we want to reach a 60% EV goal alone.
‘I would say to you that this is impossible for copper alone, never mind the other minerals. Why do I say this? Because demand will outstrip supply hugely.’
The UK’s National History Museum ran the maths on what it would take to convert the UK’s vehicle fleet to electric on the most resource-frugal batteries available. The estimate included using up half the world’s 2018 copper production.
According to Cambridge University’s Michael Kelly, converting the US car fleet requires a year’s worth of global copper production.
And the National History Museum goes on to specify that copper output would need to more than double to meet electric vehicle plans alone on a global basis.
Adding a massively expanded grid, renewables generation, and all the other uses for copper makes the net zero dream a dream.
Don’t forget that demand for copper for other uses is likely to grow at the same time and mines are being depleted and closing. 200 major copper mines will reach the end of their life before 2035, for example.
Mining legend Rick Rule gave his take on that:
‘Society has underinvested in copper for three decades. We are living as a species on copper mines that resemble me. They are 70 years of age, they are past their prime, they are old, they’re fat, they’re bald. […] No matter what we do, copper supply is going to fall. No matter what we do, going to fall.’
Things are so desperate that the Sydney Morning Herald published this headline, causing much wailing and gnashing of teeth in the environmentalist movement: ‘Boosting copper output ‘the biggest contribution Australia could make’ to hitting net zero’.
Mining being one of the most emissions- and energy-intensive industries in the world…
Of course, it’s especially difficult to do much mining at all when the population is facing the sort of inflation and shortages that net zero will cause.
It’s not just the amount of copper supply and demand. My colleague and mining expert James Cooper recently wrote the following analysis for The Insider newsletter, which points out that copper, like many resources needed for net zero, happens to be located in rather troubled jurisdictions:
‘Chile accounts for around 25% of global copper production. But right now, Chile’s copper miners are facing MAJOR hurdles in maintaining a long-term output of around 5 million tonnes per year.
‘Decade old mines, lack of investment into future development and exploration, weakening production attributed to critically low water supplies, declining grades, and a growing risk of nationalisation. The threat to Chile’s copper output has never been so great.
‘However, since I wrote that article back in November, the global supply issue has worsened further still.
‘Following a controversial election late last year, riots and violent protests have erupted across the world’s second-largest copper-producing nation…Peru.
‘It’s caused a shutdown of some of the world’s biggest copper mines.
‘Notably, Glencore [LON:GLEN] recently scaled back the capacity of its enormous Antapaccay project thanks to nationwide protests that saw an attack on the mine in December 2022.
‘Then, just last week, the Las Bambas copper mine, supplying around 2% of global copper supply, was also hit by civil unrest.
‘According to the Chinese owner, MMG [HKE:MMG], operations will be suspended indefinitely after protestors cut off road access to the mine.
‘Geopolitical instability will have long-lasting effects in this important copper-producing nation.
‘Operators will have to shelve important development and exploration projects needed to maintain future output.
‘Together Peru and Chile account for around 35% of the global supply.
‘It means there’s an enormous, concentrated risk for this critically important metal…just as the world demands more of it as it attempts to build renewable energy infrastructure.’
This should make it especially easy for our villainous Dr Copper to short-circuit copper supply and thereby drown the world in carbon emissions.
The only good news is that copper mining companies…well, you can only imagine what’ll happen to their share prices as the mad scramble for copper kicks in.
Until next time,
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Nickolai Hubble,
Editor, The Daily Reckoning Australia Weekend
PS: Due to the Easter Weekend, there will be no Monday edition of The Daily Reckoning Australia on 10 April. We will be back to our usual publishing schedule on Tuesday, 11 April.
