Out of copper, out of transition

Last week, the new chief executive of Anglo American, Duncan Wanblad, warned that there is not enough copper in the world for the energy transition, joining growing number of industry insiders sounding the alarm on the critical metal.

“I genuinely don’t see where all of this copper is going to come from at this point in time,” Wanblad told Bloomberg in an interview soon after taking the helm at the mining major.

“There are lots of copper resources in the world, and I think those resources could be brought to book, but the length of time it takes is completely under-appreciated by the market,” Wanblad said in the best traditions of tension-building, adding. “I don’t know when the world is going to wake up to it, but I suspect it will be sooner rather than later.”

Judging by the latest movements in copper prices, one might wonder what Wanblad is talking about.

Last month, copper prices plummeted to the lowest in almost two years. Goldman Sachs, one of the most adamant commodity bulls in investment bank forecasting, slashed its outlook on the basic metal citing recession risks. July wasn’t a good month for copper.

During the same month, however, S&P Global released a report that basically said that copper is about to swing into a shortage and that would wreak havoc on transition plans because it is a transition from a fossil fuel-intensive economic model to a metal-intensive model, at whose base is good old copper. It’s the wires.

“The energy transition is going to be dependent much more on copper than our current energy system,” said Daniel Yergin, who chaired the study, on which the report was based.

“There’s just been the assumption that copper and other minerals will be there. ... Copper is the metal of electrification, and electrification is much of what the energy transition is all about,” Yergin also noted, as quoted by CNBC.

I’d go as far as to say that electrification appears to be all of what the transition is all about and I would add it is sad but unsurprising that the assumption about the availability of copper and other minerals was made. It is yet one more assumption that could very well derail the transition. And it’s a huge one.