WoodMac warns that displacing China in copper supply chain is ‘unfeasible’ | Wilnesh News

Wood Mackenzie said that as Western countries seek to diversify away from China’s dominance in copper, in addition to raising costs, it may also delay the energy transition, and completely replacing it will be “unfeasible”.

China leads the world in key links in the copper supply chain, with the critical metal a critical component of emerging technologies such as renewable energy, energy storage and electric vehicles.

As the United States, Canada, Australia and European countries seek to replace their own control of copper with subsidies and investment, Wood Mackenzie warns that the twin goals of decarbonization and reducing dependence on Beijing are conflicting.

“Hundreds of billions of dollars in new copper processing and manufacturing capacity will be needed to replace China,” the natural resources data analytics company said a report stated Thursdayadding that demand for the metal could increase by 75% to 56 million tons by 2050.

“This will create inefficiencies, lead to significant price increases for manufactured goods and increase the cost and timeliness of the energy transition,” it added.

According to the International Energy Agency, existing mines and projects under construction will be able to meet only 80% of copper demand by 2030, indicating a possible copper shortage.

According to Wood Mackenzie, the initial mining of most of the world’s raw materials occurs mainly in the Americas and Africa, with China’s domestic mining production accounting for only 8% of global production.

Although this ratio rises to nearly 20% when taking into account China’s overseas mining assets, China still needs to obtain additional supplies to meet its needs. The rest of the world has sufficient supplies of primary minerals to meet current demand, the report said.

However, the copper supply chain includes several key stagesincluding mining, smelting and refining, manufacturing, and manufacture of manufactured goods.

The report said that the rest of the world has advantages in copper mining, but China lacks dominance in downstream processing and manufacturing.

Nick Pickens, global mining research director at Wood Mackenzie, said: “As governments and manufacturers aim to diversify away from China, it is critical to consider the entire supply chain and not just mining operations.”

“While copper supply risks can be mitigated and countries have begun some rebalancing, China’s dominance of the supply chain means complete substitution is not feasible.”

The report states that 80% of copper mines produce copper concentrate, which must be processed in smelters and refineries to produce copper cathodes. Manufacturers then use the material to create copper parts that ultimately become finished products.

According to data from Wood Mackenzie, China has accounted for 75% of the world’s smelting capacity growth since 2000.

“Without China, the copper supply chain will require a significant increase in processing capacity to meet energy transition goals,” Pickens said.

The report said there are currently no plans for new primary smelting capacity in North America or Europe. Instead, the United States has focused on secondary markets and copper recycling, recently establishing its First and second smelters for polymetal recycling at home.

Since 2019, China’s new copper and copper alloy manufacturing capacity additions have also accounted for about 80% of the world’s, and now account for half of global manufacturing capacity.

legislation such as Inflation Reduction Act (IRA) The United States aims to subsidize critical mineral investments. However, for copper, such efforts have encountered obstacles in the United States and Europe due to factors such as low utilization rates, high operating costs and environmental regulations, the report said.

“Pragmatism and compromise are critical to achieving the net zero target without imposing excessive costs on taxpayers. Easing global trade restrictions may be a necessary concession,” Pickens said.