Copper demand drivers, supply challenges and market outlook with Kathleen Quirk, Freeport-McMoRan

The copper industry is facing significant demand growth driven by trends including urbanization, digitalization, increased connectivity and the energy transition. In episode 4 of the Fast Forward podcast, Kathleen Quirk, CEO of Freeport-McMoRan, explored the copper market landscape, from the metal’s demand and supply challenges to the impact of geopolitics.

The key questions covered in the discussion include:

• What is driving copper demand?
• Where are the opportunities for growing copper supply?
• What are the challenges in developing copper mines?
• What is the impact of geopolitics on the copper supply chain?
• What would the copper landscape look like in ten years?

Listen to the full episode and subscribe to Fastmarkets’ Fast Forward podcast on Spotify, Apple Podcasts, Amazon Music or other podcast providers today.

What is driving copper demand?

According to Quirk, copper’s current demand boom is not just a passing phase. This current market cycle differs from the super cycle of 20 years ago, primarily driven by China’s rise as the largest copper consumer and driving prices from under $1 to $4. Now, the demand is more global and driven by decarbonization trends and renewable energy investments.

That said, the Chinese market still plays a crucial role in global copper demand, accounting for over 50%. Despite ongoing concerns about the weak property sector, copper consumption reached a record high in 2023. Quirk also attributes this unusual buildup of inventory we are witnessing in the market to various copper-intensive initiatives underway in China, such as the expansion of renewable infrastructure, electric vehicle (EV) production and potential stimulus measures for the property sector. This presents a promising outlook for future copper demand growth.

In addition, the trend towards the electrification of vehicles also brings hope that advancements will enable the electrification of large haul trucks, which could significantly benefit the mining industry by reducing costs associated with diesel engines.

What are the key trends shaping the copper market in the next decade? Read our report to learn more about what Fastmarkets’ analysts believe will be the market drivers and their impact.

Where are the opportunities for growing copper supply?

Meeting burgeoning demand while navigating supply challenges is a balancing act for copper producers. On the supply side, viable copper projects have dwindled over the last 20 years, Quirk said. While there have been some positive developments in the Democratic Republic of Congo, no significant new copper deposits have been discovered recently. The industry faces a challenge with fewer investment opportunities, but there is potential to enhance supply through advancements in technology.

There are three areas Quirk sees opportunities: Exploring new copper frontiers, maximizing existing resources and improving copper recyclability.

What are the challenges in developing copper mines?

Developing a mine is a long-term commitment that requires careful planning and a solid understanding of its impacts on communities and the environment, involving years of research and modeling. Quirk believes that effective upfront planning is crucial for sustainable mining operations, including efforts to mitigate impacts, uphold ESG standards and collaborate with communities. Companies need to be transparent about the advantages and disadvantages of mine development. This openness fosters trust and accountability, which are crucial for improving the industry’s reputation.

Many companies, particularly those in the International Council on Mining and Metals (ICMM), are committed to responsible practices. Freeport-McMoRan, for example, participates in the Copper Mark initiative, which involves third-party assessments based on criteria linked to the United Nations sustainability goals. This transparent process allows copper producers to measure their compliance and demonstrates their commitment to ethical practices to governments and customers.

Quirk believes responsible production is essential for selling products and maintaining high sustainability standards, including carbon reduction. The decision isn’t about financial gain. If not done, clients may turn to producers who are willing to meet those standards.

What is the impact of geopolitics on the copper supply chain?

Geopolitics is increasingly crucial in this sector, particularly with the energy transition highlighting the importance of resilient supply chains. While Freeport-McMoRan supports free trade and values copper as a global commodity, many countries are now prioritizing trade relations to safeguard their supply chains from geopolitical challenges.

Governments, including the US, are focusing on sourcing materials from friendly nations and encouraging investments to enhance supply chain resilience. Countries rich in natural resources, like Indonesia, are increasingly focusing on building local industries to maximize their benefits from these resources.

Establishing a sustainable model is vital for long-term success, ensuring that investments not only yield financial returns but also contribute to local communities and economies. The industry can drive employment, development and tax revenues, but it is essential to approach relationships with fairness and a focus on long-term operations.

What would the copper landscape look like in ten years?

Copper has evolved from a simple mined commodity to a vital component in technology and modern society. It is undeniably at the center of a pivotal transformation in electrification, decarbonization, urbanization and more. Copper producers need to tackle the challenges of boosting supplies to meet this accelerating demand, which presents both opportunities and pressures.

Looking ahead to the next decade, Quirk believes the industry is expected to see significant innovation and technological advancements. However, there is no anticipation for major discoveries of untapped copper resources due to the maturity of the market.

The industry is volatile, with markets sometimes overreacting in both directions. However, Quirk believes that the medium to long-term outlook for copper remains strong, supported by solid market fundamentals. While short-term macro trends can influence sentiment, such as recent record power prices, the overall fundamentals for copper suggest a positive long-term trajectory.

Fastmarkets’ Fast Forward podcast provides invaluable insights for industry professionals, metal traders and battery material buyers. For more in-depth discussions and to stay updated on the latest trends, be sure to listen to the full episode and subscribe to the Fast Forward podcast.