We have all seen news headlines for lithium, cobalt, nickel, and other rare-earth metals needed for electric vehicle batteries and the entire electricity infrastructure. The Biden administration has announced a series of moves to secure America's 'supply chain for critical minerals.' Rarely discussed, however, is copper, one essential metal at the heart of the energy transition.
In an interview on Monday, billionaire mining investor Robert Friedland told Bloomberg TV that the mining industry is failing to increase supply ahead of 'accelerating demand.' He said deposits are getting more expensive and harder to find, funding is limited, and economies have to prepare for the importance of the mining industry to lead the energy transition.
"We're heading for a train wreck here," Friedland said at Bloomberg's New York headquarters.
He's the founder of Ivanhoe Mines Ltd. and warned: "My fear is that when push finally comes to shove," copper prices might explode ten times.
Long-term of Copper futures
The world is facing a crisis of supply in copper, with not enough mines being built to satisfy future demand, he said. Ivanhoe has mines in South Africa and the Democratic Republic of the Congo.
Copper is essential in electric vehicle motors and batteries, as well as cabling and transformers, to build out the nationwide electric vehicle charging infrastructure in the US and worldwide.
According to a recent S&P Global report, EVs require twice as much copper as an internal combustion engine vehicle. The report said copper demand will double to 50,000,000 metric tons annually by 2035, more than all the copper consumed worldwide between 1900 and 2021.
Friedland's longer-term view of higher copper prices is supported by a combination of decarbonization efforts globally, rising China demand, the emergence of India, and the modernization of militaries after the Ukraine war.
He said the market has yet to realize the significance of copper and how it is essential to decarbonization efforts. He noted there are very low physical inventories of copper with historically low relative valuations of mining companies.
Friedland pointed out that recent acquisitions of mines at high premiums indicate the mining industry is aware prices of the metal are headed higher. He said the tightening of the copper market could increase prices like other commodities in recent years.
"When metals are required, the prices go crazy and nobody's willing to sell them," he said. "We're heading into that sort of situation."
Even with increasing gloom about the global economy as global central banks tighten interest rates, Friedland remains very bullish on copper.
