BloombergNEF’s energy research recently published its first global copper forecast. The study takes particular account of the surge in demand from the decarbonization of the energy sector, which largely amounts to electrification. The most important result: copper demand will increase by more than 50% by 2040. Bloomberg then immediately follows up with the sobering prediction that rising copper demand could become a bottleneck for clean energy development. There is no sign that mines will be able to keep up with the rising demand fast enough. However, Bloomberg sees copper prices rising.
BloombergNEF’s energy research recently published its first global copper forecast. The study takes particular account of the surge in demand from the decarbonization of the energy sector, which largely amounts to electrification. The most important result: copper demand will increase by more than 50% by 2040. Bloomberg then immediately follows up with the sobering prediction that rising copper demand could become a bottleneck for clean energy development. There is no sign that mines will be able to keep up with the rising demand fast enough. However, Bloomberg sees copper prices rising.
Transportation sector to overtake construction sector in copper demand
BloombergNEF estimates that copper demand related to the energy transition will grow by about 4% annually through 2040. Demand from traditional sources such as construction and the manufacture of heating and cooling equipment is calculated to grow by only 1.5% per year over the same period.
As a result of this demand growth, the transportation sector is expected to replace the construction sector as the largest single source by the end of the decade, he said. A decade ago, copper demand for transportation applications was less than half that of the construction sector. By 2040, demand in transportation will be one-third higher, according to Bloomberg.
Structural supply deficit in sight for copper
The projected growth is unlikely to be met at all. BloombergNEF projects that primary copper production can realistically increase by only about 16% through 2040. This increase falls far short of demand. By the early 2030s, copper demand could exceed supply by more than 6 million tons per year.
While higher copper demand is likely to spur further discoveries and explorations, it takes a long time to develop new projects, the report said. There is no short-term remedy: estimates suggest that no new copper deposits will come on stream in the next three years.
The structural deficit could lead to high prices, which would dampen demand, according to BloombergNEF. However, this would come at the expense of expanding clean energy and electrified transportation.
To meet the surge in demand, BloombergNEF says both new mines (regardless of ore quality) and recycled sources (regardless of how efficient they are) will be needed.
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