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American copper giant warned: there will be a very serious shortage of copper!
On November 5th, the price of copper soared! With the development in recent years, domestic motor manufacturers are under heavy cost pressure, because raw materials such as copper, aluminum and steel account for more than 60% of the motor cost, and the rising energy price, transportation cost and human resource cost make these enterprises worse. In recent years, due to the soaring world copper ingot market price and the soaring domestic motor production cost, almost all motor enterprises are facing a serious cost crisis. Quite a few motor enterprises think that the copper price is high, the cost has risen sharply, and some small enterprises can’t afford it, but there is still a market, and millions of motor orders actually account for a certain proportion. However, buyers and users are reluctant to accept the fact that the cost of motor is raised due to the increase of copper price. Since last year, motor companies have adjusted their prices several times. With the continuous soaring of copper prices, motor companies will surely usher in another price increase. Let’s wait and see.
Richard Adkerson, CEO and Chairman of Freeport-McMoran, the largest listed copper producer in the world, said that in order to rapidly roll out electric vehicles, renewable power and overhead cables, the global demand for copper surged, which would lead to a shortage of copper supply. Copper shortage may delay the progress of global economic electrification and carbon emission reduction plan.
Although copper reserves are abundant, the development of new mines may lag behind the growth of global demand. There are several reasons to explain the slow development of copper production in the world. David Kurtz, head of mining and construction of GlobalData, the parent company of Energy Monitor, said that the key factors include the increasing cost of developing mineral deposits and the fact that miners are more in pursuit of quality than quantity. In addition, even if a large amount of investment is made in new projects, it will still take many years to develop a mine.
Secondly, despite the production bottleneck, the price does not reflect the threat to supply at present. At present, the copper price is around $7,500 per ton, which is about 30% lower than the record high of over $10,000 per ton in early March, reflecting the increasingly pessimistic market expectations for global economic growth.
The decline of copper supply is already a reality. According to GlobalData, among the top ten copper-producing companies in the world, only three companies have an increase in output in the second quarter of 2022 compared with the second quarter of 2021.
Kurtz said: “The market growth is relatively limited except for several major mines in Chile and Peru, which will be put into production soon.” He added that Chile’s output has been relatively stable, because it is affected by the decline of ore grade and labor problems. Chile is still the largest copper producer in the world, but its output in 2022 is expected to decrease by 4.3%.