The Precious Base Metal

Often referred to as the “economic barometer”, copper demand is an indicator of global economic trends. Copper is a vital component to the infrastructure and technology that underpins human society as we know it. Let’s explore why this base metal is expected to become more precious over the next decade.

Growing Demand

Due to its excellent electrical and thermal conductivity, and its corrosion resistant properties, copper is one of the most widely used metals across a variety of industries. As countries around the world transition to new energy solutions, mass electrification, and forge ahead with technological advancements, the demand for copper is set to reach all-time highs.

Energy Transition Driving Copper Consumption

A strong correlation exists between energy consumption and copper demand. Over the last 30+ years, energy demand has skyrocketed across the globe. Booming populations, developing countries, technological advancements, and the clean energy transition—with the majority of countries aiming for net-zero carbon emissions by 2050—have continued to drive strong demand for energy, and consequentially, copper.

ELECTRICITY CONSUMPTION VS. COPPER CONSUMPTION

Over the last three decades, global electricity usage and refined copper consumption have outpaced population growth by nearly 3x.

The Dawn of a New Copper Age

Rapid urbanization, technology advancements, and a worldwide commitment to new energy solutions are driving demand for copper.

GLOBAL Refined COPPER DEMAND

Source: JP Morgan

+33 Million Tonnes

As more EVs and renewable technologies are developed, copper demand is expected to exceed 33 million tonnes per year by 2035.

Copper demand related to energy transition

No AI Without Copper

Artificial Intelligence data centres have significantly higher power density than non AI data centres and require a greater volume of copper. Estimates project that copper intensity in AI data centres will increase from 25 t/MW to 40 t/MW, causing copper demand from AI data centres to double in just a few years. The U.S. alone accounts for approximately one third of AI data centre copper demand worldwide.

Copper demand related to AI

Global Data Centre Copper Demand

Source: Goldman Sachs Global Investment Research, Masanet et al. (2020), Cisco, IEA, ICA
*Global data centre copper demand, Kt; includes AI and excludes cryptocurrency

Power distribution in the form of cables accounts for 75% of copper usage in AI data centres, while 22% is used in grounding and connections, and 3% is used for plumbing and HVAC systems.

Limited Supply

Copper reserves are limited, and finding new sources is becoming increasingly challenging. This scarcity of copper makes it a valuable commodity.

GLOBAL COPPER Supply & DEMAND

Source: JP Morgan

2035 copper supply deficit of 10 million tonnes

Annual copper demand is projected to reach nearly 34 million metric tonnes in the next decade. At current production rates, copper supply is expected to peak in 2028 and a global deficit of almost 10 million tonnes of copper is anticipated by 2035.

Lower Grade Copper

Over the last 30 years, there’s been a decrease of approximately 35% in average copper grades. Ore mined today typically contains 1% or less copper, in contrast to 150 years ago when ore grades typically exceeded 5%. This reduction in ore grade increases mining and processing costs.

Weighted average copper ORE Mill head grade

Source: S&P (As of July 2024)

Declining Discoveries

Copper demand is expected to outpace refined copper production by 2028 based on known copper reserves in the ground. Globally, discoveries of major copper deposits have not kept up with demand despite an increase in exploration budgets.

12.4 Years

The average time from discovery to production is 12.4 years.

Major copper discoveries over time

Source: S&P Global Market Intelligence. As of June 11, 2024. A major copper discovery includes any deposit containingat least 500,000 tonnes of copper in reserves, resources and past production.

The Cornerstone of Modern Technology

Copper forms the foundation of modern technology, but capital investment over recent decades has favoured big tech over mining. The market capitalization of the entire mining industry pales in comparison to the market capitalization of the top 10 technology companies today. However, the fact remains—there is no technology advancement without new copper production.

The tech industry’s total market capitalization is about 9x greater than the market capitalization of the metals and mining industry.

Apple Inc., just one of the top 10 tech companies, has a greater market capitalization than the market capitalization of the entire metals and mining industry.

market capitalization (US$)

Source: S&P Global. Total market capitalization of all public companies in Metals & Mining and Information Technology industries. As at June 2024. Top 10 Tech: NasdaqGS:MSFT, NasdaqGS:AAPL, NasdaqGS:NVDA, NasdaqGS:AVGO, TWSE:2330, ENXTAM:ASML, NYSE:ORCL, KOSE:A005930, NasdaqGS:AMD, NasdaqGS:QCOM

The tech industry’s total market capitalization is about 9x greater than the market capitalization of the metals and mining industry.

Apple Inc., just one of the top 10 tech companies, has a greater market capitalization than the market capitalization of the entire metals and mining industry.

Sources: zerotracker.net, Our World in Data, Copper Alliance, Bureau of Reclamation, esbnyc.com, UNdata, S&P, JP Morgan, Goldman Sachs

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A Brighter Tomorrow, On the Horizon.

For modern society to advance, the world needs more copper. Horizon Copper is investing in high-quality copper assets around the globe to help meet the growing demand for the precious base metal.

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