S&P Global Market Intelligence Analyzes Copper’s Needs for the FutureThe expected electrification of the United States – and the world – will not happen without copper. But where that copper comes from remains a significant question.
S&P Global studied this very question, examining how the U.S. will meet its need for red metals to help power the society of the future.
As a foundation, the previous year S&P Global studied the increasing demand for the materials, copper among them, as a result of the Inflation Reduction Act and its energy transmission plans. The group concluded that by 2035, projected demand for copper would be 12 percent higher than before the IRA took hold. That was only slightly less than demand increases from lithium (15 percent), cobalt (14 percent) and nickel (13 percent), all of which have much lower usage levels to begin with.
But that’s only part of the story. Copper demand was already projected to grow before the IRA was enacted. Thus, the demand for copper will be twice as high as the actual usage today, the study found.
Though increased and more efficient recycling of scrap copper will always be part of the picture, that won’t come close to meeting future demand levels. More mining of the raw material is a must.
On the surface, the question of copper below the surface looks quite promising. The U.S. has a significant endowment of copper inside its borders. “There really is enough to fuel the energy transition, at least from a copper perspective. That’s something that could happen,” says Frank Hoffman, one of the participants in the study for S&P Global, which did the work on behalf of the Copper Development Association.
The study notes the U.S. has 70 million metric tons of untapped copper reserves and resources that could be developed, in addition to production from already-operating mines. Given existing estimates, this could supply the country’s needs for 20 years.
Of course, tapping that homegrown supply is not so simple. The lead time between finding a new deposit and getting all of the permitting to mine that material can take up to 20 years.
“Under a scenario in which the Pebble, Resolution and Santa Cruz copper projects in the U.S. come online this decade and the mined copper from these properties is processed domestically, U.S. reliance on imports for refined copper would fall from 47 percent in 2023 to a little more than 30 percent by 2035 – even as energy transition demand accelerates U.S. demand. Additional projects, such as New Range and Twin Metals, among others, would push import reliance even lower by 2035. Import reliance rises to nearly 60 percent by 2035 in all other scenarios,” the report states.
Today, the U.S. consumes an average of 1.7 million metric tons annually. Imports make up approximately 44 percent of that figure, almost all coming from Latin America. Those imports are primarily handled by four historical allies, Canada, Mexico, Chile and Peru. Those four countries, all of whom the U.S. has free trade agreements with, represent 98 percent of U.S. imports.
“A lot of folks might look at the market as it stands and think, in terms of the U.S. supply between domestic production and imports from friendly allies, we’re all set.” As we do some basic math, looking out, that’s much less certain,” says Hoffman, associate director, Market Intelligence for S&P Global.
For starters, the U.S. isn’t the only country that is embarking on this quest. Western Europe and China are both heavily invested in EVs and other areas of electrification.
This is reflected in the distribution of imports. While Chile supplies 69 percent of the United States’ total imports, the U.S. is not Chile’s largest copper trading partner. That would be China. That imbalance is not necessarily going to move in the favor of the U.S. in the future.
Additionally, there exist threats to the supply chain. A full 95 percent of U.S. imports of copper come through the Panama Canal. But for how long?
“Transit through the canal has been impeded since last year by low water levels in Gatun Lake, which feeds the Canal’s lock system. Climate change is likely to at least sustain pressure on water levels. In addition to disrupting the Panama Canal, this could intensify civil opposition in Latin America to the industrial use of water. In a scenario under which these pressures led to a 10 percent reduction in imports, roughly a third of the United States’ refined copper consumption would have to be met by either increased domestic production or alternative sources,” the study notes.
So what does it mean? S&P Global believes that a single solution to the country’s needs in this front is not possible. Rather, a multi-pronged approach will be required.
“There is not going to be one single thing that fills in some of these gaps. There is going to need to be a number of different solutions that come into play,” Hoffman said.
Some possibilities to close the gap between demand ambitions and supply include:
- Increase domestic production through new properties opening up;
- Increase production through technology improvements that yield better output on existing mines;
- Broadening the import support base;
- Technology changes that support the use of material substitution.
Even if some substitution can occur, there’s no question that copper is instrumental to electrification of all sorts, even compared with other critical minerals.
S&P Global’s study outlined the five major sources of electrification as EV batteries and storage, wind energy, solar photovoltaics, transmission and distribution and other low-carbon energies.
Some materials, such as lithium and cobalt, are crucial for batteries and storage. Nickel is also used in that category, as well as wind energy and other low-carbon energies.
Carbon is the only material required in all five.
And that gets to one other way the U.S. can begin to meet its future demands, the CDA adds: for the U.S. Geological Survey to include copper on its critical mineral list, along with nickel, lithium and cobalt. The Department of Energy has already made that distinction.
In October, both houses of the United States Congress introduced bills to amend the Energy Act of 2020 to align “the definition of ‘critical minerals’ between the Department of Energy and the U.S. Geological Survey to include critical materials such as copper.”
The CDA says the introduction of the Critical Mineral Consistency Act comes at a pivotal moment, as the global race for essential materials like copper intensifies, with China leading much of the production. Under current law, benefits granted to critical minerals do not always extend to critical materials – leaving key resources like copper, electrical steel, silicon and silicon carbide without access to vital federal programs. This legislation would close that gap, ensuring that materials essential to U.S. infrastructure, clean energy development and defense manufacturing can receive the support they need.
“The Copper Development Association commends the strong bipartisan support for the Critical Mineral Consistency Act, which demonstrates a shared commitment to strengthening U.S. supply chains and supporting critical materials like copper,” said Adam Estelle, president and CEO of the CDA. “This commonsense legislation has received widespread backing, including endorsements from clean energy trade associations and positive feedback from the U.S. Geological Survey. We urge Congress to act quickly to pass this bill, which will help secure our clean energy future and reduce reliance on foreign sources for these indispensable materials.”
[Caption:]
The Resolution Copper Project is one of several mines in the developmental stage that could help reduce the United States’ dependence on imported material. (Photo courtesy Rio Tinto)