Cellar Politics®

FT - October 23- The next big resource shock "The metal’s superb conductivity makes it central to almost every part of the low-carbon energy story, from solar panels to electric cars. Copper is vital to AI data centres too — for both the equipment inside them and the power that keeps them running. Ditto, the increasingly high-tech military kit that governments are racing to procure in a volatile geopolitical landscape. "Copper demand, in short, is embarking on an epic climb. And the supply outlook is nowhere near keeping pace. "In a report this week, researchers at BloombergNEF set out the scale of the copper problem, warning of a “massive long-term shortage” beginning in 2028. Projected supply is set to undershoot demand by 8 per cent in 2035, and 44 per cent in 2050. "The research follows similar warnings of big impending supply deficits from other sources including the International Energy Agency. "Jonathan Price, chief executive of the major copper producer Teck, gave an even starker forecast at last week’s FT Live Metals and Mining Summit, predicting a supply shortage of about 30 per cent in 2035. "Why aren’t miners increasing supply to meet demand? Part of the problem, Price noted, is how long it takes this sector to do such a thing. “It can take six months to build a data centre,” he said. “It can take 15 years to discover, permit and build a new mine.” "In fact, many copper miners are struggling just to maintain production at their existing sites, many of which have been in operation for decades and are faced with declining ore quality. Relative to the scale of demand, they’re bringing precious few new “greenfield” mines into production, having cut back work to find and develop them over the past couple of decades. "While the supply squeeze has yet to bite in earnest, copper prices have already been on an exuberant run: last month the price on the London Metal Exchange reached a new record of $14,875 per tonne, up 76 per cent since the start of 2024." "If copper demand grows as strongly as is projected, this could be just a foretaste of the price rises to come. Price sounded pleased about this prospect, saying the supply-demand mismatch made for a 'very constructive long-term market outlook.' "