Copper-bottomed

Efforts to cut the carbon intensity of copper are at risk from climate change

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“We have said it before – there will absolutely be no energy transition to ‘net-zero’ without a transformational increase in the amount of primary copper produced by the mining industry. However, the inhabitants of our planet are also demanding that mining companies work to limit greenhouse gas emissions and safeguard the environment.”

Robert Friedland, Ivanhoe Mines

Copper demand is set to jump by 72% to 52.5 Mt per annum in 2050, according to projections by BHP, the worlds largest mining group. Outside of traditional sources of growth in emerging economies (i.e., demand for air-conditioning and other appliances), the miner sees decarbonisation and data centres as the key sources of demand growth.¹

Transport’s share of copper demand is forecast to double; EV’s are three times as copper intensive as ICE vehicles. Meanwhile, data centre’s share of global copper demand could grow six-fold according to BHP. The burgeoning need for power cables and cooling to support AI development will all mean lots more copper demand.

However, as the second chart from BHP illustrates, copper discoveries are far less common, and when they are found, deposits tend to be much deeper than earlier mines. This means more energy is required to extract the ore, increasing the emissions intensity of the mine, and raising the cost of production. As Robert Friedland, founder of Ivanhoe Mines notes, copper miners are under increasing pressure to cut the emissions intensity of their mines, in turn forcing miners to devote more resources to their existing productive assets.

Copper miners, burnt by previous periods of overexpansion, are also reluctant to invest in new productive assets, fearing the anticipated surge in copper demand might be a one-off. And so rather than invest in additional mining capacity (which can take well over a decade to develop), they seek to gain greater market share. BHP’s recent failed bid to buy Anglo American can be seen in this context. Instead of developing additional copper assets of its own, BHP saw an opportune moment to capture those of one of its competitors instead.

If these dynamics continue to play out over the next decade then the copper market could be set for a severe supply shortfall. Higher copper prices will benefit miners, but if it ultimately hampers the speed of decarbonisation and data centre rollout then manufacturers may then look towards substitute materials.

Copper leading the pack

The copper supply chain (including mining and processing) has reduced its emissions intensity every year since 2020. In contrast, the emissions intensity associated with extracting and refining other energy transition commodities - i.e., nickel, lithium and cobalt - have tended to trend higher, albeit fluctuating significantly on a year-by-year basis (see 'Green' lithium).²

Global mined copper output increased by 378kt between 2022 and 2023, while total mine-site emissions are estimated to have declined by 1.8 Mt CO2e (down 5.3%). Scope 1 emissions (on-site activities) have remained broadly unchanged due to the cost and timescale involved with switching from diesel powered equipment to other technologies. With many copper mines approaching the end of their productive life, miners are reluctant to invest when the opportunity for a return is more limited. In contrast, there has been a significant effort on the part of miners to cut their Scope 2 emissions, i.e., power purchased from the grid.