Copper mining executives touted their companies' supply growth plans during recent second-quarter earnings calls while tying the prospect of aggressive mine-building to higher prices for the commodity.

The focus on growth and copper prices comes against the backdrop of a projected surge in copper demand that analysts expect will outstrip supply later this decade and into the 2030s. Copper is an excellent conductor of electricity and is widely seen as crucial to the unfolding energy transition.

Recent government policy pushes aimed at accelerating the energy transition, such as US President Biden's $400 billion Inflation Reduction Act, are set to bolster metal demand, according to a recent S&P Global Commodity Insights analysis. The Inflation Reduction Act is set to boost US energy transition copper demand by 12% over a pre-Inflation Reduction Act forecast for 2035, the analysis shows.

"They're definitely getting their ducks in a row, so they can have all their projects ready ... when copper prices hit $4.50-$5 per pound," said Stefan Ioannou, a Cormark Securities base metals mining analyst. A copper price of $5 per pound equates to $11,023.10 per metric ton.

Copper prices have largely ranged between about $8,000/t and $9,000/t over the past year, significantly lower than copper prices through much of 2021 and 2022. In recent years, the price of copper peaked at $11,299.50/t on Oct. 18, 2021, according to S&P Global Market Intelligence data. Analysts have attributed metal price weakness in 2023, in part, to faltering economic growth in China.

"Current price levels are clearly not presenting a major incentive to increase investments and production," Ole Hansen, Saxo Bank's head of commodity strategy, said in an email. Committing to new demand is "a bit of a catch-22, with miners having to believe strongly in the prospect for rising demand and eventually higher prices."

Getting set

During recent earnings calls, many mining executives tied industrywide supply expansion to higher copper prices.

"The ability of the copper industry to meet this rising demand is a major challenge, and we are working very hard to increase our supplies as we look forward," Kathleen Quirk, president of Freeport-McMoRan Inc., said on a July 20 earnings call. "We believe prices will need to rise to incentivize new supplies of copper."

Similarly, Glencore PLC CEO Gary Nagle linked the company's plans to develop the MARA copper project in Argentina to a more robust copper market.

"The world is starting to recognize the shortage of copper coming in the next few years ... but before we bring [MARA] on, we certainly want to see higher copper prices," Nagle said on an Aug. 8 earnings call.

Glencore recently consolidated ownership of MARA, agreeing to acquire 56.25% of the project it did not already own from Pan American Silver Corp. in a $475 million deal announced July 31.

Likewise, Jonathan Price, CEO of Teck Resources Ltd., hinged growth in copper on financial returns, among other factors.

"We have the opportunity to double copper production in the near term and double it again by the end of the decade to drive substantial new intrinsic value," Price said on a July 27 earnings call. "But we will always remain disciplined in balancing the pursuit of growth with returning capital to investors in line with our capital allocation framework."

Copper supply

Along with price, Glencore's Nagle pointed to near-term supply growth as weighing on the company's decision about when to build MARA.

"The market is below $8,500 [per metric ton] of copper now," Nagle said. "We see a couple of projects ramping up around the world. We certainly don't want to bring copper units into a market that may have additional or excess supply."

The refined copper market will see annual copper supply surpluses from 2024 through 2026 and then flip to a supply deficit in 2027, according to a Commodity Insights research analysis released July 19. The global mined copper supply is expected to peak in 2029 at 26.8 million metric tons, Commodity Insights analysts said in an Aug. 4 note.

Mining executives have bound their optimistic views of the copper market to this longer-term picture of a widening gap between copper supply and demand.

Rio Tinto Group CEO Jakob Stausholm outlined investments in copper mining during a July 26 earnings call and pointed to longer-term bullishness over copper amid the metal-intensive energy transition.

"These outlooks are super exciting for Rio Tinto, given the opportunity we have to grow both aluminum and copper production," Stausholm said.

Among copper investments in 2023, Rio Tinto committed $498 million in June to bolster the Kennecott copper mine in the US. The company plans to ramp up underground mining at Kennecott over a two-year period.

Meanwhile, a slow rollout of copper projects could benefit miners, as a tight copper market could lead to prices spiking.

"These guys realize that if you don't quickly build these projects, it only bodes that much better for the copper price itself," Ioannou said, while noting that it would be unlikely for miners to be able to build projects quick enough to oversupply the market given the scale of projected demand growth.

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