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Copper must rally 50% for supply to meet demand, Glencore chief says

Commodities

Copper must rally 50% for supply to meet demand, Glencore chief says

Transition to cleaner energy has ignited a powerful rally in the price of the industrial metal

Goldman Sachs expects the price of copper to reach $15,000 a tonne by the middle of this decade © REUTERS

The price of copper needs to rise 50 per cent to encourage enough new supply to meet projected demand from the global green revolution, says the chief executive of Glencore.

Ivan Glasenberg said the mining industry would need to produce an extra 1m tonnes of the metal a year to meet many governments’ goals of reaching net zero carbon emissions by the middle of this century, yet most of the world’s easy deposits had already been mined.

“You will need $15,000 copper to encourage a lot of this more difficult investment,” Glasenberg told the FT’s Global Boardroom summit on Thursday. “People are not going to go to those more difficult parts of the world unless they’re certain.”

Glasenberg added new projects would need to be in “riskier areas” including Russia and parts of Africa.

Glencore is a big producer of copper, used in everything from wind turbines to electric vehicles. The metal’s price has soared 90 per cent over the past year to trade above $10,000 a tonne for the first time in a decade.

The rally has been fuelled by voracious demand from China, the world’s biggest consumer of raw materials, and virus-related supply disruptions.

But as investment in renewable energy and electric vehicles gathers pace, demand is expected to jump. Global consumption of copper is about 29m tonnes a year including scrap.

Earlier this week, the International Energy Agency warned that high minerals prices could delay a transition to clean energy given the amount of metals needed for batteries, solar panels and wind turbines.

Goldman Sachs expects copper to reach $15,000 a tonne by the middle of this decade, arguing the only way a looming supply crunch can be solved is with a sharp rise in price to new record highs. Copper’s previous high at $10,190 a tonne came at the height of the last commodities boom in 2011.

Commodity trader Trafigura also reckons copper will exceed $15,000 a tonne over the next decade as the greening of the global economy boosts demand and supply struggles to keep up.

Speaking at the FT event, Steele Li, vice-chair and chief investment officer of China Molybdenum, the country’s largest cobalt producer, said the electric vehicle sector would need about 2.4m tonnes of copper by 2030 if electric cars make up 30 per cent of the market by then.

“We need another two Glencores,” he said. “That’s the scale we’re talking about . . . I don’t know how we’ll find that much copper to fill that gap.”

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Kathleen Quirk, chief financial officer of Freeport-McMoRan, another big copper producer, told the FT summit more use of scrap copper would help to meet rising demand.

“We always say necessity is the mother of invention . . . but in copper, it’s not like the oil industry where there was a new source of supply coming from the shale production,” she said. “All the easy projects have been done.”

Glasenberg also teased the prospect that Tesla could be a sensible suitor for Glencore, given the electric carmaker’s market value of almost $650bn widely trumps the commodity group’s $57bn value.

“If you see the multiples Tesla trades at and the multiples in the mining industry . . . he [Elon Musk] could get us rather cheaply,” said Glasenberg, who is due to retire at the end of June but will remain a big shareholder in the company with a 9.1 per cent stake.

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