Precious metals: China’s copper market control threatens renewable supply chain resilience
The world’s net zero hopes relies on one metal, with one nation dominating access to this vital resource. Alternatives are needed to speed up transition and improve security.
The world cannot currently reach Net Zero without the help of China, according to a leading global supply chain procurement specialist.
Copper is an essential part of the green transition and global demand for the precious metal is likely to soar for multiple reasons.
However, Oliver Chapman, CEO and founder at OCI Group – which helps companies improve their supply chains – insists a key driver will be the requirement for many ‘millions of miles’ of copper transmission lines that will be required to link solar and wind farms to the national grid. This includes long distance transition lines, in some cases stretching for more than 1,000miles.
The ‘metal of electrification’ hit a new all-time high, above $11,000 per tonne [$5.11 per pound] earlier this year. It has been estimated that by 2031 demand for copper will rise to 36.6million metric tonnes from around 25million metric tonnes today, according to McKinsey. There could be a supply deficit of about 6.5 million metric tonnes, but demand may be even greater than forecast.
China’s position in the Copper supply chain is such that governments will need to maintain good relationships with Beijing to reach Net Zero by 2050. ‘Clearly, the dual aims of decarbonising and reducing reliance on China are at odds. Copper is a key part of the green transition, but China is a key part of the copper ecosystem,’ says Chapman. ‘Perhaps the single biggest contributor to future copper demand will come from the hundreds of thousands, or maybe millions of miles, of copper transmission lines required to link solar and wind farms to the grid. Including long-distance transmission.
‘China has created a position of market power partly through its investment into copper mines worldwide, and because of the expertise and supply chains it has created in copper refining,’ he continues. ‘The rest of the world is most certainly significantly behind China in copper and cannot easily create a copper supply chain that is not reliant on China. It is important to create a resilient copper supply chain, but it is hard to see how that goal can be met without China.’
New copper mines are becoming increasingly difficult to build due to the surging costs to run them and deteriorating geology. Meanwhile, a vast mine in Panama was recently shut down by the Government after protests. Chapman suggests there are alternatives to copper, such as aluminium, and although China remains a major player in that market, too, the metal is much more plentiful than copper and the sector is therefore more pluralistic. The substitution of copper with aluminium creates an opportunity for the world to create a more ‘resilient’ supply chain that is not so reliant on one country.
‘There is an alternative: to use aluminium instead of copper. Aluminium is a less effective conductor of electricity than copper but is also much lighter. Even more importantly, aluminium is the most abundant metal in the Earth’s crust,’ says Chapman. ‘China is also a market leader in aluminium but because aluminium resources are more plentiful, it is more practical to build supply chains for aluminium less reliant on China. Even so, China’s position does illustrate how creating a resilient supply chain not reliant on any one region can be challenging.’
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