A new report from Wood Mackenzie warns that efforts by major global economies to reposition critical minerals supply chains outside of China could lead to increased costs and delays in the energy transition.
The report, titled Securing copper supply: no China, no energy transition, highlights the significant challenges in replacing China’s dominant role in the copper supply chain.
Copper, a crucial component in electrification, is essential for global decarbonisation efforts. Wood Mackenzie projects that copper demand will rise by 75 per cent to 56 million tonnes by 2050, necessitating substantial investment in new processing and fabrication facilities.
Nick Pickens, research director of global mining at Wood Mackenzie, emphasised the scale of the challenge: “A scenario without China for the copper supply chain would require a substantial increase in processing capacity to meet energy transition targets.”
He noted that replacing China’s smelting and refining capability alone would require nearly US$85 billion in investment.
China currently dominates the global copper supply chain, including mining, downstream processing, and semi-manufacturing.
Since 2000, China has accounted for 75 per cent of global smelter capacity growth and now controls 97 per cent of global smelting and refining capacity.
The country’s investments in downstream processing and semi-manufacturing present significant challenges to global copper supply security.
China has added nearly 11 million tonnes of copper and alloy capacity since 2019, representing around 80 per cent of global additions.
While some rebalancing efforts are underway, the scale of China’s dominance makes complete replacement unfeasible.
New copper smelting facilities are set to come online outside China, including in India, Indonesia, and the Democratic Republic of Congo.
However, these additions pale in comparison to China’s capacity.
The introduction of new processing and fabrication facilities outside China may result in higher costs and delays in the energy transition.
Financing these investments presents additional hurdles, particularly in regions like Europe where there is strong resistance to new smelter projects on environmental and social grounds.
The report underscores the critical role of copper in the global shift toward clean energy and decarbonisation.
As demand for copper increases, efforts to secure critical minerals and reduce reliance on China’s supply pose significant challenges.
Pickens concluded: “Pragmatism and compromise will be essential to achieve net zero goals without imposing excessive costs on taxpayers. Easing global trade restrictions could be one necessary concession.”
As the world grapples with these complex supply chain issues, finding a balance between supply security, cost-effectiveness, and environmental considerations will be crucial for the successful progression of the global energy transition.
