Meeting energy transition demand may need copper mines capex of $250 bil to 2030: BHP

As much as $250 billion in mine investments could be needed by 2030 to meet heightened demand for copper resulting from the energy transition, Vandita Pant, chief commercial officer of miner BHP, told the FT Commodities Global Summit March 21.

"We think that a quarter of a trillion dollars of capex may be needed between now and 2030," the BHP CCO said in a panel on mining for the energy transition. But whether sufficient investments are made would depend on copper prices being high enough, she added.

Copper, one of the most efficient electricity conductors, is an essential driver of the energy transition due to its widespread uses in electrification including electric vehicle charging infrastructure. BHP is one of world's largest copper producers.

"For the next two-three few years there will be surplus in copper markets because there are a lot of projects coming in, but then the wedge starts opening up in the last third of this decade and the durable inducement price will have to be higher," Pant said.

From a financing point of view, each mine is different, with different economics, country risk and grades, the BHP executive said.

"The mix between sustaining capital and growth capital has shifted towards sustaining: you could potentially solve some of the challenges of resources depletion via brownfield extensions... but there isn't a lot of growth capital happening," Pant said.

The backing of governments in producing and buying countries, regulators, investors and buyers would be essential to incentivize some of that financing, she said.

Prices seen rising

More financing will come with higher copper prices, which should rise in the foreseeable future, according to other summit participants.

"However, it's not only a question of money," said George Cheveley, portfolio manager of global asset manager Ninety One. "For instance in Chile a number of companies are saying: we can't sanction new projects because we don't know what the tax regime is going to be because we can't work out what our return will be."

Chile has the world's largest copper reserves and is home to BHP's Escondida, the world's largest copper mine.

Every major miner has brought a new copper project on stream in recent years, indicating financing certainly has not collapsed, Cheveley noted on the same panel.

"I used to worry about a surplus at the end of this year but I don't anymore because there's been so much disruption and demand's looking better now," the Ninety One portfolio manager said.

"The capital will be there when the signals are right... we should expect higher prices and there is a point where you should be investing," he said. "We know it's going to be needed.... so long as you've got a project which you know is lower than average cost and the capex is reasonable, the price will be there for you, maybe not in the first year but over a 20-year life you will make money on that project," Cheveley said.

Copper demand has grown just under 3% a year since 1950, he said. "That's faster than supply growth and so every few years the copper price goes nuts. Copper has always been limited by the pace at which mines have been built," he said.

Mercuria's head of energy transition metals Guillaume de Dardel, speaking in a panel on critical minerals, was confident "the gaps in copper supply will be resolved, so long as the urgency is maintained," describing copper's price as "resilient."

"The price has to rise due to bottlenecks in the supply chain: we will need more supply," he said.

Mercuria sees one of its roles as "to invest in the chokepoints in the supply chain," he noted.

Commodities trader Trafigura's co-head of metals and minerals trading Kostas Bintas considered it possible copper prices could reach as high as $12,000/mt within the next year on growing demand, tight supplies and low stocks.

The London Metal Exchange Grade A 3-month copper price closed at $8,671/mt March 20, up $49/mt on day. The red metal reached a multi-year high of $10,674/mt on March 4, 2022, in the days following Russia's invasion of Ukraine.

"Copper is the most critical of metals in the short term," Bintas said on the critical minerals panel. Copper was added to the European Union's list of critical minerals when this was updated last week, although it's not yet part of the US critical minerals list, he noted.

Bintas believes there has been a "disconnect" between physical copper markets and copper prices, which despite relatively low stocks fell to a two-month low of $8,555/mt March 15 amid global financial market uncertainties – copper is often considered a barometer of economic health.

"We could see a supply shock even this year... even a zero-stock environment," he said. Global stocks of copper have recently been as low as 530,000 mt, according to the Trafigura trader.

S&P Global Commodity Insights' metals and mining research team expects stronger copper prices supported by seasonal demand improvement, led by China, from late March or early April, tempered by loosening copper supply due to normalizing mine production and shipments, it said in a March 20 report.

However, the S&P analysts also noted that higher copper scrap availability in China compared with last year is bolstering supply. "In response, we have downgraded our average LME 3M price forecast for 2023 to $8,848/mt," they said.