Copper’s electric outlook

By Anthony Fensom

Copper prices have come under pressure from a rising US dollar and fears over China’s economic outlook. But miners point to a bullish longer-term trend due to the critical mineral’s key role in the global energy transition.

On 22 August, copper was trading at US$8342 per tonne, down nearly 12 per cent from its year-high of US$9436 in January, when optimism over China’s post-COVID reopening drove prices higher.

Rising US inflation has forced the US dollar higher, weighing on commodity prices; while weak trade and inflation data from China, the world’s largest copper importer, has dampened sentiment.

Nevertheless, Australian copper miners and explorers are looking towards a brighter future, given increasing government support and the need for greater copper supplies to power global electrification.

Critical mineral

Australian state governments have led the charge on making copper an official ‘critical mineral’.

On 16 August, the South Australian Government officially declared the red metal a ‘critical mineral’ for the state, country and world, as economies seek to decarbonise.

Copper is set to be a key feature in the state government’s upcoming Critical Minerals Strategy.

‘Copper is critical for new technologies, particularly those associated with electrification, and demand for copper globally is forecast to significantly outstrip currently available supply as the world’s economies increasingly shift to electrification,’ the South Australian Government said in a media release.

‘By including copper in our Critical Minerals Strategy, we follow similar-minded jurisdictions, such as the European Union, Japan, India, China, Canada and the United States, which just this month officially added copper to its 2023 Critical Materials Assessment for the first time, in a historic move that reflects the growing importance of energy transition technologies.’

South Australia also plans to advocate for copper to be included in the national critical minerals list.

Queensland has also moved to make copper an official critical mineral. In April 2023, the Queensland Government announced around $5 million in funding for several critical mineral exploration projects, including copper.

The state government previously announced a $5-billion investment in CopperString 2032, aimed at unlocking new deposits in the state’s North West Minerals Province.

In June 2023, the Queensland Government unveiled its own critical minerals strategy, including copper, and other critical minerals like cobalt, graphite, silica and rare earths.

Copper key for clean energy

The International Energy Agency (IEA) sees copper as critical for clean energy technologies, with the metal ranked as highly important for solar photovoltaics, wind, bioenergy, electricity networks, electric vehicles (EVs) and battery storage. Copper ranked as ‘moderately’ important for hydro, concentrating solar power and nuclear, according to its 2021 report.

By 2030, demand for renewables could account for 19.2 megatonnes of copper, compared to 10.8 megatonnes for other copper demand, according to the IEA and Evelyn Partners.

As a result, copper demand is projected to outstrip supply, resulting in a six-megatonne supply deficit by the end of the decade, or 30 per cent of annual production.

Currently ranked second in the world for copper resources and the eighth-largest producer, Australia is well-placed to capitalise on growing copper demand.

The Australian Government’s forecaster sees Australian export earnings growing to $13 billion in fiscal 2025, according to the Office of the Chief Economist’s June 2023 Resources and Energy Quarterly. Production is expected to increase to 906,000 tonnes by fiscal 2025, up from 806,000 tonnes in fiscal 2023.

Although copper exploration expenditure fell in the March 2023 quarter to $136 million, it was still higher than the same period a year earlier, and greater than levels seen before COVID-19.

Importantly for miners, prices are expected to rebound in the second half of 2023, aided by Chinese stimulus and a potential pause to US interest rate hikes. The government forecaster expects the London Metal Exchange spot price to average US$8600 per tonne for 2023.

‘Demand will be a stronger driver of price than supply over the year, with risks skewed to the downside if the Chinese recovery stalls, or if major economies experience a hard landing,’ the report says.

Together with China, India and the Association of Southeast Asian Nations are expected to make ‘strong contributions’ to copper demand, with population growth and higher urbanisation boosting Indian demand.

European demand could also increase on the back of increased EV penetration, since EVs are more copper-intensive than combustion vehicles. For example, the copper required to produce an EV is estimated at four times a conventional petrol- or diesel-powered car.

Miners respond

Australian miners have stepped up their copper investments. In August, Rio Tinto acquired Pan American Silver’s majority stake in Agua de la Falda S.A., which holds exploration tenements in Chile’s Atacama region.

In July, BHP signed a memorandum of understanding with Japan’s JX Metals, aimed at reducing greenhouse gas emissions in the copper supply chain.

After completing its $10 billion acquisition of OZ Minerals, BHP has flagged plans to boost copper production to more than 500,000 tonnes per annum from its new South Australian copper division.

Among the explorers, True North Copper listed on the Australian stock market in June 2023, with the company announcing in August ‘exceptional’ high-grade copper-cobalt-silver results from its first drillhole at its Vero resource in Queensland.

Hillgrove Resources announced in June 2023 its ‘final investment decision’ on the stage-one development of its Kanmantoo underground copper mine in South Australia. First copper concentrate production is due in the first quarter of 2024.

Superior Resources has also launched a maiden drilling program for its Cockie Creek prospect, one of several copper prospects within its Greenvale project in Queensland.

Superior Resources Managing Director Peter Hwang says the Brisbane-based company aimed to discover a ‘large, mineralised porphyry system’, with the first holes exceeding expectations. And with further drilling planned at its Bottletree copper prospect, Superior Resources sees plenty of excitement ahead for investors in 2023.

‘Copper holds the key to the energy transition,’ Hwang says.

‘Australia is extremely well positioned from this structural growth trend in demand for copper, which is a commodity that is fundamental to the global economy.’ 

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