Creating a sustainable copper value chain

Last year, Goldman Sachs called copper “the new oil”. While this admits copper’s centrality to the low-carbon transition, it also highlights the increasingly fractious role that copper is playing in the global economy. Demand for “the metal of electrification” is projected to double from 25 million t today, to around 50 million t by 2035. S&P analysis suggests that supply may not keep pace, with ‘rocky road’ scenarios predicting a 9.9 million t shortfall by 2035. Worst scenario fears are that, like the 20th century ‘scramble for oil’, copper scarcity may destabilise international security.

Already, there are signs of growing protectionism from the US’s Inflation Reduction Act, the EU’s Critical Raw Materials Act, and China’s 2021 – 25 five-year plan and subsequent Central Economic Work Conference. All three legislative agendas prioritise domestic production and material security. This poses a key challenge for proponents of responsible copper. Increasing demand, competition, and protectionism present the risk for nations to compromise environmental, social, and governance (ESG) principles in favour of market dominance.

This increasing competition is especially problematic in the context of copper’s global value chain. Despite their domestic ambitions, major producers of copper products still import most of their ore. In 2021, China imported US$52.4 billion worth of copper ore and, according to S&P analysis, the US, in the best-case scenario, will still import 57% of its refined copper by 2035. The copper value chain spans the entire globe. With major economic blocs struggling for dominance, competing regulatory regimes are unlikely to collaborate. This may mount a burden on supply chain operators as they struggle to comply with these competing regimes to access markets. This heavy burden of compliance runs the risk of diverting resources and focus away from responsible production.

This risk is compounded by the growing environmental footprint that results from increased copper demand. According to the International Finance Corporation (IFC)’s January 2023 Net Zero Roadmap for Copper, if global copper mining were to increase to the extent necessary to support renewable technologies by 2050 without the adoption of mitigation measures or practices, greenhouse gas emissions from copper production alone would double. This does not mean that responsible copper goals are out of reach, but it does mean that complacency is not an option.

The copper industry cannot rely on comprehensive, global regulation for responsible practices, at least in the short term. Instead, it must adopt a global standard based on collaboration, data sharing, and a full value chain approach. To succeed, this standard cannot come from government or industries alone – it must include all the stakeholders that are impacted by the copper value chain.

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