Concerns Over Copper Supply in Transition to Low-Carbon Energy
Global Energy Watchdog reports that the demand for copper, crucial for advancing toward a low-carbon future, is expected to outstrip supply within the next decade. Currently, a significant shortfall of 30% is projected in the metals required for energy systems by 2035, as indicated by analysis from the International Energy Agency (IEA).
Fatih Birol, the IEA’s executive director, emphasized the urgency of the situation, stating, “This will be a big challenge. It’s time to sound the alarm.” He urged developed nations to refine more copper and other essential metals domestically, while forming partnerships with developing countries for better resource management.
The shift towards renewable energy relies heavily on critical minerals needed for manufacturing solar panels and wind turbines. While these resources are mined across places like Africa, Australia, and Latin America, China dominates the processing sector, handling over 70% of the world’s key minerals essential for energy production.
This imbalance poses a challenge, especially since prices for many of these vital minerals have decreased since their peaks in 2021 and 2022. However, the IEA anticipates a slight decline in the share of top suppliers over the next decade.
Birol called for increased efforts to boost the supply of these critical minerals in order to successfully transition to a low-carbon economy. “Diversification is crucial,” he remarked, noting that while regions like Africa and Latin America possess the necessary resources, technology is concentrated in countries like the UK, Europe, Japan, the USA, and Korea.
He further highlighted the need for government intervention, arguing that market forces alone cannot address this issue. “Government policies are needed to support new entrants in the market,” he stated.
Developing trade links and industries will not only diversify global supply but also help avoid supply bottlenecks and price hikes similar to those witnessed in 2021. “If costs rise, that could inhibit progress toward a greener economy,” he pointed out. The importance of copper, which requires about 17 years from discovery to production, can’t be overstated.
Birol mentioned, “We analyzed all copper mining in Latin America, Africa, and Australia, including all pipelines.” He cautioned that increasing costs could lead to significant delays in green transitions.
Nevertheless, with swift governmental action, the expected shortage might be mitigated. “A supply crunch is inevitable, but recycling copper and substituting it with metals like aluminum could hasten market readiness,” he observed.
The rapid demand for copper in recent years has largely stemmed from China’s initiative to enhance its power grid, especially for clean energy and associated technologies like solar and wind power. Furthermore, the necessity for other key minerals is surging as well, with lithium demand reportedly increasing by nearly 30% last year.
The IEA has warned that supply disruptions pose risks not just to the green energy transition, but also to the broader global economy. “The impact of a critical mineral supply shock can be far-reaching, potentially raising consumer prices and diminishing industry competitiveness,” the report noted.
Moreover, the sustained supply shock of battery metals could lead to an increase in global battery pack prices by as much as 40-50%.
