Copper prices continue on the down path (see Fig. 1), having tumbled to an average of $8,560 per tonne since the beginning of this year, a marked fall from $8,790 in 2022 and $9,300 a year earlier.
The world’s biggest copper producers are warning of an imminent supply shortage globally, as mines won’t be able to deliver enough of the metal to keep pace with the clean energy transition,[1] while investors and banks are cautious about financing new projects amid the weakness of the global economy and mounting inflationary pressure.
Despite headwinds, copper remains the top choice on the mining agenda. According to S&P Global, the capital allocation share for 2024 is heavily weighted toward copper (c. 30% of the total spend, see Fig. 2), followed by gold (28.1%) and iron ore (18.3%).[2] In the next couple years, the refined copper market will shift to a surplus. Estimates by the International Copper Study Group (ICSG) suggest that the shortfall will shrink from last year’s 461,000 tonnes to 27,000 in 2023, with production to exceed usage by 467,000 tonnes in the following year, driven mostly by additional output from new or expanded mines in the Democratic Republic of the Congo, Peru and Chile.
However, the growing scarcity of new copper mines and major discoveries will soon become a serious problem. Against this backdrop, S&P Global expects refined copper supply to fall short of demand by 274,000 tonnes in 2027.[3]
Companies are considering different options to tackle this issue, one being to spread the soaring cost of new projects. The current jump in M&A activity is therefore quite logical, with a flurry of copper mining deals lined up for the next 12 months[4] as miners seek to share risks and costs with other industry players.