For a long time the price of copper showed marginal fluctuations in the markets and for investors it did not play an important role. But now that seems to be changing. Since April, the red metal has been approaching the $10,000 mark per ton. Until now there has been a correlation between global economic growth and demand for copper. However, demand is now growing significantly despite evidence of a slowdown in global growth.

The price of this important metal on the London Metal Exchange rose as much as 1.7% to $10,033.50 a tonne on May 1. This is the highest price since April 2022. “Index funds and exchange-traded funds are pushing retail money into the metals market,” Zadip Daga of analyst firm Metal Intelligence Center told Reuters.

What is copper needed for?

If we want to free energy production from the consumption of fossil fuels, this can only be achieved with the smart electrification of the economy. And copper is essential for this. “Because of its physical properties – mainly its electrical conductivity – copper is the most important raw material for the energy transition,” Joachim Berlebach from Earth Resource Investments in Zurich told DW.

“If we really want to get off fossil fuels, we will need about the same amount of copper in the next three decades as we have in all of human history to date.” Michael Widmer, commodities strategist at Bank of America (BofA), also pointed to the economy’s weaning from coal as the main reason for the rise in prices, speaking to Handelsblatt. “Copper is used in almost every industry and is therefore considered an economic indicator.”

But on the one hand the demand increases and on the other the supply remains stagnant or even decreases, which also raises the prices. Commodities expert Berlebach is not surprised: “Because of the lack of investment in new mines in the last 10 years there are not enough copper mines.” What he also points out is a lack of investment. “Based on data collected by the International Energy Agency,” says Widmer, “we can estimate how high the annual demand for copper will be until 2050. Then we can estimate how much we need to invest in new mines, at least 127 billion dollars annually. Last year, however, it was only $104 billion. Investments continue to decline since 2012.”

Unprofitable copper mining

And as if everything else wasn’t enough, this particular problem can’t be solved quickly. “Even if the price of copper continued to rise, production could not increase quickly because it takes up to 15 years from the first drilling to production,” Berlebach says. “Because of the reduction in ore content, new mines must also be designed larger.” However, according to Michael Widmer, new mines often face opposition because “copper mining pollutes the environment”.

And he points out to Handelsblatt an example from Central America. Last year, mining company First Quantum was forced to close the country’s largest copper mine. “Initially, there was only a conflict between the government and First Quantum. Then came the protests of the local population. In the end, the government closed the mine and said it would no longer be available on the market.”

When it comes to minerals or metals, it is often said that one or the other raw material is available and here, it just needs to be mined. Joachim Berlebach doesn’t see it that way. “Copper mining in Germany is unprofitable, relatively unproductive and only theoretically possible,” he says. “In my opinion, large-scale mining is not possible in Germany due to the lack of large deposits and time-consuming bureaucratic procedures. We are dependent on deposits in South America or the Congo.”

His answer to our question, whether Germany could solve the problem of dependence on copper imports, is short and clear: “No!”. And you can’t do without copper wherever it comes from. “You can use aluminum for overhead lines, but once you need a coil, like in a wind turbine or an electric car, you can’t avoid copper. Aluminum only has about 65% the conductivity of copper, and the wires get very thick.”

Prices on the rise and in the future

Bank of America analyst Michael Widmer believes prices will remain high. “Of course,” he admits to Handelsblatt, “there may be short-term corrections but I see prices rising in the long term.” The news from Oslo seems to miss the real situation.

The Norwegian government is preparing deep-sea mining off the country’s coast. In early 2023, the relevant offshore authority reported that there are “significant quantities of mineral resources” in Norwegian waters. Not only zinc and cobalt but also copper. However, it seems unlikely that this will satisfy the current “hunger” for red gold.

Editor: Irini Anastasopoulou