Olena Isaieva, Expert in Trading, Energy, and Resources & Andy Churr, Partner, Mining & Sustainability lead, Baringa Partners Switzerland
Copper, alongside other critical minerals, is key to a greener future. Electricity networks, solar panels, wind farms, and electric vehicles require more critical minerals than their fossil-fuelled predecessors.
The entire energy network needs to be overhauled and expanded in order to carry this clean energy to our homes, offices, cars, and electronics. Building this new energy system depends on securing raw materials including copper, as well as cobalt, aluminium, and steel.
As the government seeks to meet its Net Zero commitments, and consumers turn to greener options such as electric cars, demand for copper and other critical minerals is increasing. This demand will double by 2030 according to the International Energy Agency, presenting a major supply challenge that could endanger the energy transition, and the urgent quest for Net Zero.
Our research indicates there could be an annual deficit of up to 1.5 terawatts of renewable energy because of the copper shortage. Yet there are enough reserves in the ground from mines operating today to produce 28 years’ worth of copper, 36 years’ of lithium, and 24 years’ of cobalt.
The bottleneck is the capacity of mines and refineries to extract and refine the critical minerals. Urgent investments are critical to address this shortage, however private investment is deterred by price uncertainty and geopolitical risk.
At present, critical minerals production is highly concentrated in four countries with very different risk profiles: Chili produces 25% of copper globally, the Democratic Republic of Congo produces 70% of cobalt and Australia produces 47% of lithium. And China controls between 42%-76% of global refining capacity for these minerals.
Another factor increasing uncertainty around demand and price is technological advancement in recycling, that might have a negative impact on demand and prices in the future. Recycled copper is projected to increase 1.5 times by 2035, which may cause oversupply and decrease prices.
One solution is for companies to form vertical partnerships with the producers of these commodities, securing supply and underpinning the much-needed investment.
Every day in Switzerland, commodity traders are taking supply positions and delivering copper and other critical minerals numerous clients and industries. Concluding contracts with a range of mines, refiners, and clients, they can take on, and mitigate some of these risks, but the overall shortage will still persist without further investment.
Commodity traders need the support of investors and financiers to increase the rate of extraction and refining of critical minerals. This, if done well, will also benefit some of the poorer nations of the world who hold the vast majority of these minerals, and secure access to the critical minerals needed to achieve Net Zero on time.