Energy transition and data centres will likely be sources of solid copper demand growth, Australian multinational mining and metals company BHP has said.\u00a0<\/p>\n
\u201cThe energy transition \u2014 electric vehicles and the build-out of a reliable wind and solar-based power grid \u2014 remains a key source of upside for copper beyond the traditional levers,\u201d it said in its latest Energy and Commodity Outlook.<\/p>\n
With electric vehicles three times as copper-intensive as internal combustion engine vehicles, BHP expects the transport sector to make up over 20 per cent of global copper demand by 2040, compared to the current 11 per cent.\u00a0<\/p>\n
\n6-fold data centres\u2019 demand growth
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Earlier this year, Research agency BMI, a unit of Fitch Solutions, quoted the International Energy Agency to point out that battery electric vehicles require approximately 53.2 kg of copper, 58.1 per cent copper than the 22.3 kg needed in the production of internal combustion engine vehicles (ICEs).\u00a0<\/p>\n
\u201cOffshore wind, onshore wind and solar power sources require 8,000 kg, 2,900 kg and 2,822.1 kg of copper respectively, significantly more than the 1,150 kg required in coal-fired power plants. This will push the market into greater deficit and drive prices higher towards the end of the decade,\u201d it said.\u00a0<\/p>\n
The Australian mining and metals major said, \u201cData centres will be another source of solid copper demand growth, requiring vast amounts of power and cooling (which all require copper) to deliver AI-enabled services. Demand growth in this sector, currently about 1 per cent of global copper demand, could grow six-fold out to 2050.\u201d\u00a0\u00a0<\/p>\n
The World Bank, in its commodity outlook, said the steady increase in the demand for copper, driven by energy transition technologies \u2014 particularly electricity grid infrastructure, EVs, and solar panels \u2014 is set to continue.\u00a0<\/p>\n
\nPrice outlook
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\u201cCopper supply growth is expected to be modest this year, limited by production stoppages and declining ore grades in major producers in South America, before picking up in 2025,\u201d it said.\u00a0<\/p>\n
BMI said it expects the copper market to remain in deficit in the longer term as the green transition accelerates along with the demand for \u201cgreen\u201d metals including copper.\u00a0<\/p>\n
\u201cIn 2024, we expect prices to average $8,800\/tonne, above the 2023 average as the US dollar weakens and demand outpaces supply. Beyond that, we forecast prices to reach $11,500\/tonne in 2032 as the long-term structural deficit persists due to a very strong long-term demand outlook, with the market deficit climbing to 1.2 million tonnes,\u201d the research agency said.<\/p>\n
Currently, three-month copper contracts on the London Metal Exchange are quoted at a 10-week high of $9,720 per tonne.\u00a0<\/p>\n
\nScrap additions
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Though there could be a marginal surplus in copper in 2024 and a \u201cslightly larger but still modest\u201d surplus in 2025, BHP expects the expected accumulation of inventory to only provide \u201cscant coverage against anticipated deficits in the latter half of this decade\u201d.<\/p>\n
\u201cIf we look ahead to the second half of the decade and beyond, there are several key features of the copper value chain that give us confidence in its long-term fundamentals,\u201d said the mining and minerals major.\u00a0<\/p>\n
On the other hand, scrap additions should continue to outpace demand growth, rising to meet roughly half of total demand in 2050 versus around one-third today, it said.\u00a0<\/p>\n
\nIndia\u2019s distinction
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\u201cHowever, regulatory constraints, logistics and economic challenges remain as headwinds for global scrap supply, with many developing countries particularly constrained in their ability to source scrap,\u201d BHP said.\u00a0<\/p>\n
Last year, \u00a0the International Copper Association India (ICA India) said that through a \u201cstock and flow model\u201d it had found India emerging globally with one of the highest recycling rates for copper due to high collection efficiency and minimal loss during resmelting. India\u2019s recycling rate is above 95 per cent.\u00a0<\/p>\n
BHP said while recycled scrap will be an important source of supply to meet growing demand, primary mine supply is struggling to keep up and continues to face large-scale challenges.\u00a0<\/p>\n
\u201cIn our estimation, the world requires about 10 million tonnes per annum of copper supply over the next 10 years, including mine life extensions and replacement for depletions. This translates to around a quarter trillion dollars in investment in the sector for the same period,\u201d it said.<\/p>\n
\nProjects in pipeline
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BMI said a significant pipeline of new projects will bring additional copper to the market \u2013particularly in Chile, Peru, Australia and Canada.<\/p>\n
\u201cCopper is required in almost every aspect of the green energy transition. We will also continue to see some growth in the global construction industry, a driver of copper demand unrelated to the green energy transition,\u201d it said.<\/p>\n
The Australian Office of the Chief Economist said new US investment in manufacturing capacity is expected to accelerate copper consumption over the outlook period to 2028. \u201cThis includes considerable spending on domestic infrastructure (mainly clean energy and EVs related manufacturing),\u201d it said.<\/p>\n