Copper demand is expected to rise by 75% to 56-million tonnes by 2050, necessitating substantial investment, a new report by data analytics firm Wood Mackenzie shows.

The firm says that, as major global economies look to reposition critical minerals supply chains outside China, the resulting inefficiencies could increase the cost of finished goods and delay the energy transition. Copper, in particular, is a crucial component in electrification and therefore critical for decarbonisation.

Currently, China dominates copper mining, downstream processing and semi-manufacturing.

Wood Mackenzie points out that shifting away from China will require massive investments in new copper processing and fabrication facilities.

Wood Mackenzie's August Horizons report titled ‘Securing copper supply: no China, no energy transition,’ states that replacing China’s smelting and refining capability alone to meet the rest of the world's demand would require nearly $85-billion.

“A scenario without China for the copper supply chain would require a substantial increase in processing capacity to meet energy transition targets. Based on our projections, there will be an additional 8.6-million tonnes of copper demand outside China over the next decade.

“This demand represents 70% of smelter capability and 55% of fabricator capacity in the rest of the world. As governments and manufacturers aim to diversify away from China, it is crucial to consider the entire supply chain, not just mining operations,” Wood Mackenzie global mining research director Nick Pickens said on August 15.

The global copper supply chain is a complex system comprising four key stages: mining, smelting and refining, semi-fabricating and manufacturing of finished goods.

Copper flows from raw material extraction in the Americas and Africa to downstream processing and manufacturing, predominantly in China. The country’s substantial investments in downstream processing and semi-manufacturing sectors present significant challenges to global copper supply security.

The report states that, since 2000, China has accounted for 75% of global smelter capacity growth and currently controls 97% of global smelting and refining capacity, contributing over three-million tonnes of production and nearly $25-billion in investment.

The country has also added nearly 11-million tonnes of copper and alloy capacity since 2019, representing about 80% of global additions. About two-thirds of these facilities produce wire rods, giving China half of the world’s fabrication capacity, with further expansion being under way.

“China's copper smelting industry has undergone significant evolution. In the 2000s, a drive for stricter environmental and efficiency standards led to the modernisation of smelting capabilities. Today, Chinese smelters are low cost and meet high environmental standards, particularly in sulphur dioxide capture, making them highly competitive,” Wood Mackenzie copper markets managing consultant Zhifei Liu said.

Pickens added that semi-fabricators outside of China, especially in Europe, are facing challenges owing to lower use and higher operating costs.

Regulations on carbon emissions, such as the EU’s Carbon Border Adjustment Mechanism, could reduce competitiveness by imposing higher taxes on the European copper industry without providing equivalent benefits.

Additionally, US government incentives such as the Inflation Reduction Act may not ensure the long-term sustainability of the industry.

The report also highlights significant shifts in the global copper smelting landscape, with new facilities set to come online this year outside China. India is launching a custom smelter, Indonesia is adding two integrated smelters, and a new smelter in the Democratic Republic of Congo is expected to be completed by 2025, primarily driven by Chinese investment.

According to Wood Mackenzie, these additions will add 1.6-million tonnes to global smelting capacity, the largest increase outside China in decades.

However, there are no plans for new primary smelting capacities in North America or Europe. Instead, the US is focusing on the secondary market and scrap copper, including establishing its first secondary smelter for complex materials in Georgia.

“While copper supply risks can be mitigated and some rebalancing has begun in various countries, the scale of China’s dominance in the supply chain means complete replacement is unfeasible. The introduction of new processing and fabrication facilities may result in higher costs and delays in the energy transition.”

“Financing these investments presents additional hurdles, with resistance to new smelter projects on environmental and social grounds particularly strong in Europe. Pragmatism and compromise will be essential to achieve net zero goals without imposing excessive costs on taxpayers. Easing global trade restrictions could be one necessary concession,” Pickens said.