![What if we ran out of copper? [Science and Technology Podcast]](https://i0.wp.com/epthinktank.eu/wp-content/uploads/2024/10/AdobeStock_688196729.png?fit=1024%2C683&ssl=1)
Written by Andrés García Higuera.
Copper is a relatively common element with a variety of suppliers, and that should typically mean a stable market. However, the copper market has recently been showing unusual instability. New EU legislation, though not always directly related, seems to be having a significant impact on copper prices. This is the case for the Chips Act and the Critical Raw Materials Act – designed to make EU industry more resilient by improving strategic autonomy – but also for laws concerning energy, artificial intelligence and digitalisation. New factors, including looming shortages in strategic raw materials – such as copper – may strongly influence political action.
Copper is not on the EU’s critical raw materials (CRMs) list because it currently has a broad supplier base. As is the case with other elements, such as nickel, copper has instead been identified as strategic (SRM). This means that the copper market is less prone to instability and follows well defined trends, from which some general conclusions can be drawn, even if recent disruptions make drawing conclusions challenging.
Disruptions such as COVID-19 and Russia’s war on Ukraine, with the subsequent food and energy crisis, have highlighted shortcomings in the EU’s strategic autonomy. The price of raw and strategic materials such as copper has doubled in 4 years and a copper shortage has driven spot prices up by nearly 20 % in the last year; forecasts are also gloomy.
One of the first effects of the pandemic, which had a particular impact on European industry, was a worldwide chip shortage, affecting a significant number of industrial sectors between 2020 and 2023. The impact was keenly felt by the European automotive industry, with major production plants having to stop production owing to supply chain disruptions. The EU also started facing bottlenecks and vulnerabilities along the supply chain, owing to its heavy reliance on imports of materials from single sources and the shrinking number of suppliers. Following Russia’s invasion of Ukraine, despite widespread greenwashing and claims to the contrary, the economic sanctions imposed on Russia had the immediate effect of showing the extent to which some Member States of the EU were reliant on fossil fuels and other goods from that country.
These issues do not stand alone but risk amplifying each other’s effects. As a major example, it is anticipated that the required shift towards renewable energy will significantly increase demand for copper in the near future. Other market projections agree with S&P Global in indicating that copper consumption may soar to 50 million tonnes by the year 2035, with the highest increases seen in the United States, China, Europe, and India. If supply cannot satisfy the burgeoning demand, the cost of transitioning to clean energy sources could surge, potentially hindering the progress of the energy transition at a time when rapid advancement is imperative to achieve established climate objectives.
Potential impacts and developments
According to Energy Monitor, International Energy Agency data suggests that an average 3.6 megawatt wind turbine, which can power more than 3 300 homes, contains about 29 tonnes of copper. Cabling of wind farms is significant in the bulk of copper usage, since every megawatt of generating capacity requires in excess of eight tonnes of copper. As well as copper, a whole range of other critical minerals are needed, from rare earths to zinc and tungsten. About 98 % of renewable energy’s demand for zinc is driven by its use in protecting wind turbines from corrosion. Copper and aluminium are the materials most used for electric conductors in energy transporting wire and coils. Aluminium is the main alternative to copper since it is a more common element and its market is consequently more stable; its low weight makes it appropriate for overhead power cables. However, copper is a better conductor and is especially appropriate for rotors in electric motors.
Electric mobility is greatly increasing demand in both these areas, since a shift towards electric vehicles clearly requires significant reinforcement of the grid as well as efficient and relatively big electric motors. Additionally, the deployment of artificial intelligence-based solutions and digitalisation in general, with all the necessary transporting of energy, transforming of electricity, cooling systems and data storage, will add to the steady rise in consumption. This growing demand for copper will require new technologies to help with production and circularity. Coarse particle recovery, sulphide leaching and process optimisation with artificial intelligence will become valuable tools for maximising copper extraction from existing operations. However, even taking recycling into account, the International Copper Association‘s most optimistic prediction states that, by the middle of the next decade, supply will fall clearly short of demand.
There was a special focus on the European Green Deal during the last legislative term. This had the indisputable merit of setting important long-term goals and beginning the major change in public mentality necessary for a more sustainable society. However, the resulting EU policies met with significant social opposition, with the ‘gilets jaunes‘ movement and the farmer’s protests, for instance. The term’s end saw intense debate, peaking in a squabble over the nature restoration law. This drew attention to the possibly arbitrary nature of certain self-imposed tight deadlines and their potential to destabilise the market for strategic supplies such as copper.
Anticipatory policy-making
The recent crises and the disruptions they generated in specific supply chains have been an eye opener, pushing the EU to react and pass legislation that may be key in the future. The Chips Act entered into force in September 2023 as a quick reaction by the EU seeking to strengthen Europe’s technological leadership in the face of recent shortages. It will mobilise over €43 billion of public and private investments and set out measures to prepare, anticipate, and respond swiftly to any future supply chain disruptions. It aims to boost Europe’s research and technology leadership, raise production capacity to 20 % of the global market by 2030, while also addressing the skills shortage and attracting new talent. Similarly, the Critical Raw Materials Act entered into force in May 2024. It has been designed to strengthen the whole value chain, diversifying the EU’s imports to mitigate supply risks, and to ensure a high level of environmental protection by improving circularity and sustainability. The proposed measures have still to be implemented by the Member States, which will not be easy. While these measures are a prerequisite and have yet to take effect, electrification has already become the main strategy for facing the energy crisis, by decarbonising different sectors such as the automotive industry, and will require extensive use of critical and strategical raw materials.
The risk that the looming copper scarcity will hinder electrification – which was presented as a core measure within the Green Deal – is just one example, albeit a powerful one. S&P Global estimates that investment of over US$500 billion, using long-term commodities (tier one assets), will be necessary to open the required three large, long-life, low-cost copper mines per year for the next 29 years. Furthermore, off-shoring may not always continue to be the best choice when considering strategic autonomy; Poland is the EU’s biggest copper producer but accounts for only 2 % of the world’s total production. The EU will have to provide for research and development in the area, for instance through its new research and innovation framework programme (FP10), currently in preparation. The EU must also make sure that legislation allows for local sustainable extraction and processing of raw materials. Additionally, and within a broader action plan, the coming circular economy act will be key for boosting recycling, which already accounts for a third of global copper consumption. Copper is easy to process and 100 % reusable, without any loss of performance. The passing of fundamental pieces of legislation, such as the critical raw materials and chips acts, demonstrates the increased focus on strategic autonomy, defined by specific actions to pave the way to meet long-term goals while pushing for a more competitive Europe. This change of tack may already be showing some positive effects on markets, such as that for copper. Along the same lines, Ursula von der Leyen presented the EU’s priorities for 2024 to 2029 as being: a free and democratic Europe; a strong and secure Europe; and a prosperous and competitive Europe. Without renouncing its medium- and long-term targets, the EU is set to review some deadlines with an eye to industry and the market, laying the foundations that would offer the required margin for action.
Read this ‘at a glance note’ on ‘What if we ran out of copper?‘ in the Think Tank pages of the European Parliament.
Listen to podcast ‘What if we ran out of copper?‘ on YouTube.
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