Why Copper May Be One of the Tightest Markets The World Has Ever Seen

Episode Summary

Executive Summary: The episode argues that copper is entering an unprecedented supply squeeze driven by green-transition demand and a near-total lack of new mine investment. Goldman Sachs’ Nick Snowden says deficits could hit record levels by mid-decade and copper may need dramatically higher prices—possibly far above $15,000/ton—to trigger demand destruction and rebalance the market.

Main Topics: Copper as a strategic green-transition metal (Priority: 5/5): The hosts frame copper as essential to electrification, EVs, charging infrastructure, wind, solar, and grid expansion, making it a central but underappreciated commodity in decarbonization. Structural supply deficit and peak production (Priority: 5/5): Snowden argues copper supply is near peak now, with production topping out by late 2023/early 2024 and then contracting, while inventories are already low and deficits are set to become the largest ever. Why prices have softened in the short term (Priority: 4/5): Near-term copper weakness is attributed to temporary factors like Chinese lockdown-related demand softness and stronger-than-expected copper exports from Russia, which mask the longer-term squeeze. Mining underinvestment, ESG, and permitting delays (Priority: 5/5): The discussion emphasizes that few new mines are being approved because of cautious post-boom management, ESG pressure, slower permitting, water constraints, and weaker talent inflows into mining. Demand growth from green uses versus traditional uses (Priority: 4/5): Copper demand is currently dominated by traditional uses, but green demand is growing rapidly and is expected to rise from a small share today to about one-fifth of total demand by 2030. Limited substitutes and weak technology fixes (Priority: 4/5): Copper has few viable substitutes in high-density electrical applications, and no shale-like production breakthrough is visible; aluminum and other alternatives face their own constraints. Potential for extreme upside in copper prices (Priority: 5/5): Goldman’s outlook suggests prices may need to rise to extraordinary levels—well beyond historical highs—to force demand destruction, with scenarios discussed up to $50,000 or even $100,000/ton.

Key Arguments: Copper is likely to face the largest-ever market deficit by the middle of the decade and the largest-ever long-term deficit by the end of the decade. Current prices are not high enough to incentivize enough new mine investment; there has reportedly been no new copper mine approved in the last two years despite doubled prices. Green transition demand could add as much incremental copper demand this decade as China did in the 2000s. Supply growth is constrained not by geology but by capital discipline, ESG/permitting hurdles, water access, and labor shortages. Copper has few practical substitutes for its role as a conductor, especially in space-constrained uses like EVs and grids. Demand destruction in metals requires much larger price moves than in energy or agriculture because copper is a small share of final goods costs. The most likely market adjustment is not a supply surge but much higher prices that eventually force efficiency gains, substitution at the margin, or slower adoption. The mining sector’s own response to past boom-bust trauma has made it more conservative, delaying the next supply wave.

Data Points: Global copper demand in 2022: 24 million tons - Estimated total world copper demand for the year. Non-green copper demand in 2022: 22.5 million tons - Construction, wiring, electronics, cars, and grid-related uses. Green copper demand in 2022: 1.5 million tons - EVs, EV charging infrastructure, wind, and solar. Green share of global demand today: ~5% - Current share of green demand in total copper consumption. Green copper demand by 2025: ~3 million tons - Expected to roughly double from 2022 levels. Green copper demand by 2030: 6–7 million tons - Projected green demand by the end of the decade. Green share of global demand by 2030: Closer to 20% - Expected shift in demand mix over the next several years. Copper price mentioned: ~$9,300/ton - Approximate LME price referenced during the discussion. Goldman Sachs copper forecast: $15,000/ton - Price level cited as needed to rebalance extreme deficits. Potential upside scenarios: $50,000/ton to $100,000/ton - Extreme outcomes discussed as possible if demand destruction is required. Oil price comparison in the 2000s: 7x increase - Used as an analogy for how far copper prices may need to rise. Copper supply growth timing: Peak production end-2023 to Q1 2024 - Forecast peak in current copper production. Post-peak production trend: ~1% annual contraction from 2025 - Expected open-ended decline in supply after peak. Permitting timeline today: 2–3 years - Time needed to get copper mine permits before construction in current ESG environment. Permitting timeline 20 years ago: 6–12 months - Historical comparison for mine approvals. Chile permitting change: More than tripled - Example of how long it now takes to permit a copper project in a major producing country. No new mine approvals: 0 new copper mines approved in two years - Despite copper price doubling, no new mine approvals were noted. Response lag of a past copper technology (SXEW): Over a decade - Historical example showing mining technology adoption is slow.

Pivotal Quotes: "I would argue copper is likely to be the tightest commodity will have ever seen." — Jeff Curry (referenced by hosts): Used to motivate the follow-up episode on copper’s structural tightness. "By the middle of this decade, we're forecasting the largest ever deficit in the copper market" — Nick Snowden: Core thesis on the severity and timing of the impending supply shortfall. "There's essentially no decarbonization without copper." — Nick Snowden: Explanation of why green transition demand is structurally bullish for copper.

Implications: Copper may become a binding constraint on electrification and decarbonization. If investment, permitting, and talent shortages persist, prices could spike sharply, forcing efficiency gains, substitution at the margin, or slower deployment of green infrastructure.