US copper manufacturer Freeport McMoran warn of a very serious shortage of copper

On Monday, Richard Adkerson, CEO and Chairman of Freeport McMoran, the world's largest listed copper producer, said that in order to quickly roll out electric vehicles, renewable power and overhead cables, the global demand for copper surged, which would lead to a shortage of copper supply. The copper shortage may delay the progress of the global economic electrification and carbon emission reduction plan.

Freeport McMoRan said in the third quarter financial report earlier this month that the decarbonization campaign will improve the use intensity of global copper. Adkerson said on the financial report conference call: "Although there will be some new projects that started four to five years ago and were postponed due to the COVID-19 epidemic, which will bring some new copper to the market in the next few years, in addition, there is no action in any important new supply projects."

The company believes that in order to achieve the goal of global energy transformation, a large number of new mines will be needed for supply and development. However, the current copper price is not enough to support the supply and development of new mines, which is expected to increase the supply shortage in the future.

Copper has a wide range of applications, from wind turbines, electric wires to electric vehicles and other fields. Copper is critical to the "green" economy because of its ability to conduct electricity. The amount of copper required by an electric vehicle is three times that of a traditional internal combustion engine, while the copper required by renewable energy projects is often five times that of traditional natural gas, coal and nuclear power plants.

Wood Mackenzie, a consulting firm, said in a report released last week that in the next decade, 9.7 million tons of copper will be supplied annually from undeveloped projects. The current market scale is 25 million tons per year.

Maximo Pacheco, chairman of Codelco, the world's largest copper producer, predicted that the copper gap would reach 6 million to 7 million tons in the next decade. Pacheco said that Codelco has been trying to maintain the output of its mine, and the company could not recover to the output level of last year in four years.

Although copper reserves are abundant, the development of new mines may lag behind the growth of global demand. There are several reasons for the slow development of copper production worldwide. David Kurtz, director of mining and construction of GlobalData, the parent company of Energy Monitoring, said that the key factors included the increasing cost of developing the deposit and the miners' pursuit of quality rather than quantity. In addition, even though a large amount of investment has been made in new projects, it still takes many years to develop a mine.

Secondly, despite the production bottleneck, the price does not reflect the situation that the supply is threatened. The copper price is currently around 7500 dollars per ton, down about 30% from the record high of more than 10000 dollars per ton at the beginning of March, reflecting the growing pessimism of the market on global economic growth.

The decline in copper supply is already a reality. According to the data of GlobalData, among the top ten copper producing companies in the world, only three companies have increased their output in the second quarter of 2022 compared with the second quarter of 2021.

Kurtz said: "The market growth is relatively limited except that several major mines in Chile and Peru are about to be put into production." He added that Chile's production has been relatively stable because of the impact of declining ore grades and labor problems. Chile remains the largest copper producer in the world, but its output is expected to decrease by 4.3% in 2022.