Top industry executives in the copper industry say the market should prepare for a long-term supply squeeze of the red metal. Even though copper prices have softened in recent weeks and the market is expected to see a surplus in 2024, top executives predict supply shortfalls thanks to the limited number of copper mines that are under development.
Copper producers have been warning about a reduction in ore quality and quantity for several months now, stating that the world currently doesn’t have enough mines under development to meet the accelerating demand for copper.
On top of its applications in industrial machinery, construction, and electrical equipment, copper also serves as a critical component in renewable energy infrastructure such as thermal, hydro, wind and solar energy. Consequently, the red metal is poised to see an almost exponential increase in demand over the next few decades as the United States, the European Union and the rest of the world transition from fossil fuels to clean energy as part of global efforts to mitigate climate change.
With the world’s largest copper miners struggling to secure and develop new copper mines amid labor issues and falling prices, the global market is poised to experience a major copper shortfall once demand shoots past copper supply. Copper market analysts say the fact that the copper market currently has a surplus points to decreasing demand for copper amid a reduction in global manufacturing that could be a sign of impending recession, especially in developed economies.
Even with the global economy experiencing a slowdown that could reduce worldwide manufacturing even further, top copper industry executives say the clean-energy transition will result in strong copper demand and support prices in the medium- and long-term. In the near-term, however, uncertainty regarding the global economy and China’s copper market continue to dampen copper demand and prices.
China is the largest copper importer in the world, consuming over one-half of the globe’s refined copper to support its massive construction industry as well as its surprisingly impressive foray into renewable energy.
During the recent FT Mining Summit, copper executives noted that lower copper prices reduce the financial incentive for investing in newer mines.
Future jumps in copper prices may not even be enough to incentivize the industry to invest in new mines and increase supply, Freeport-McMoRan president Kathleen Quirk said. Freeport-McMoRan, currently one of the largest copper producers in the country, noted in its Q2 2023 earnings that the copper supply gap could start as soon as 2035 when demand for low-carbon infrastructure peaks.
Exploration companies such as Arizona Metals Corp. (TSX: AMC) (OTCQX: AZMCF) could find themselves at the forefront of bringing new copper production facilities online at a time when production is woefully inadequate to meet the expected surge in demand as energy systems transition away from fossil fuels.
NOTE TO INVESTORS: The latest news and updates relating to Arizona Metals Corp. (TSX: AMC) (OTCQX: AZMCF) are available in the company’s newsroom at https://ibn.fm/AZMCF
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