Copper market could falter without China: WoodMac

While much of the Western world is prioritising supply chains that exclude China from the picture, Wood Mackenzie (WoodMac) believes such a reality could slow the energy transition.

WoodMac has highlighted the potential inefficiencies from building out new supply chains, which could heighten costs and necessitate substantial investment.

The market analyst used copper as a key example.

“The world cannot achieve decarbonisation without copper, a crucial component in electrification,” WoodMac said in a recent report. “Currently, China dominates copper mining, downstream processing (smelting and refining) and semi-manufacturing.”

According to WoodMac, copper demand is expected to jump 75 per cent to 56 million tonnes (Mt) by 2050. To meet this through an ex-China supply chain would require nearly $US85 billion of investment in new smelting and refining plants.

“A scenario without China for the copper supply chain would require a substantial increase in processing capacity to meet energy transition targets,” WoodMac research director, global mining Nick Pickens said.

“Based on our projections, there will be an additional 8.6Mt of copper demand outside China over the next decade. This demand represents 70 per cent of smelter capability and 55 per cent of fabricator capacity in the rest of the world.

“As governments and manufacturers aim to diversify away from China, it is crucial to consider the entire supply chain, not just mining operations.”

China has evolved its copper smelting industry over the last 20 years, not only building out the business to account for 75 per cent of global smelter capacity growth since 2020, currently controlling 97 per cent of global smelting and refining capacity, but also modernising facilities.

“Today, Chinese smelters are low cost and meet high environmental standards, particularly in sulphur dioxide capture, making them highly competitive,” WoodMac managing consultant, copper markets Zhifei Liu said.

WoodMac acknowledged copper developments outside China, including new smelters in India, Indonesia and the Democratic Republic of Congo, while the likes of Europe, Canada and Australia prioritise mineral extraction and the circular economy.

But the market analyst warned that for the copper market to “remain effective”, China must be included into the equation in some way, shape or form.

“For the copper market to remain effective and deliver on the world’s requirements, key stakeholders need to chart a realistic course that involves China,” WoodMac said.

“Yes, supply risk can be mitigated, and a certain amount of rebalancing has already begun in some countries. However, the scale of China’s dominance in the copper supply chain means it cannot be fully replaced.”