The World is Running Out of Copper, Why is This the Worst Time for This to Happen?

World copper reserves are very low and production capacity has been significantly reduced in recent years due to lack of investment in the sector. Argentina has a great opportunity.

copper
World copper reserves are very low and production capacity has been significantly reduced in recent years.

These days, the price of copper is news globally, since it is around $10,000 a ton on the London Metals Exchange, well above historical values. This is due to the fact that in the mining sector all forecasts indicate that demand in the coming years will have a strong growth and the production of metal will not be enough to cover the increase in consumption.

The reasons behind the increase in demand have a lot to do with the energy transition, where copper will play a leading role.

Large quantities of the industrial metal will be needed for the production of electric cars and for the energy transport networks to the electric charging terminals. Another factor is linked to the construction of new data centers by technology companies, where infrastructures will be decisive to contribute to digital development and at the same time continue advances in artificial intelligence material.

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Until now, China supplied the global market and had the capacity to cover the production deficit that was generated in other parts of the world thanks to the stock it has stored. According to private reports, in the last decade alone, Chinese mining companies increased their production by 40%, but the needs are so huge that industry analysts rule out that the Asian giant will have enough capacity to respond.

The price of copper worldwide

In the stock market, copper futures increased by 115% from the lows that were touched in 2020, in the midst of the coronavirus pandemic. This is due to the almost no reaction that the companies had in looking for new deposits: less supply of the product implies an increase in prices.

The main problem is that human beings have exhausted the most productive deposits and it is increasingly expensive for companies to develop a mine that ensures years of continuous production.

Global inflation increased the costs of the equipment necessary for extraction since metals are needed to do so and that generates a vicious circle that contributes to increasing prices. In reality, there are projects in geological terms, but the problem is the lack of investment that has not been made in the sector for years.

mining
Copper would reach $12,000 a ton, how far can the increase in metal prices go?

Analysts value at 150 billion dollars the money that the industry would have to invest in the coming years to be able to meet the new demand. The figure seems unattainable, even more so taking into account that - according to S&P Global - the sector reached 3 billion euros in 2023 destined for the exploration of new deposits, being the highest figure in the last decade.

What is invested is very far from what is needed and that is really a problem.That's why everything indicates that global production will not be enough to cover the increase in demand in the coming years.

What must happen for companies to invest?

The group of BlackRock investors recently offered a significant fact: according to their estimates, the price of copper should reach up to $12,000 per ton, more than 20% above current prices, so that the industry can begin to be encouraged to make large investments in new mines. If these calculations are correct, it seems inevitable that the price of a ton of copper will continue to rise and if so, it would be the highest price ever seen in history, even above the $10,674 that was recorded in 2022.

The opportunity for Argentina

Our country began producing copper on a large scale in 1997 with the Bajo la Alumbrera mine, in the province of Catamarca and stopped doing so in 2018. It was 21 years of exploitation in which there were tax revenues of US$ 5037 million and exports of US$ 17.3 billion

There are currently eight large-scale projects located in four provinces that are in the advanced exploration stage. In the province of San Juan, the one with the most projects, there are Los Azules, El Pachón, Josemaría, El Altar and Filo del Sol; in Salta is Taca Taca; in Catamarca there is MARA (Mina Agua Rica - Alumbrera); and in Mendoza the San Jorge project. The resource estimates of each make Argentina one of the main countries in the world with potential in copper production.

The construction stage of these projects will require an investment of more than US$ 22 billion and could generate the country sales of US$ 9 billion to 11 billion annually (with a positive commercial balance of US$ 7 billion). It is estimated that 1.2 million tons could be extracted thanks to a local reserve of 63.1 million tons of copper.