The investment opportunity for copper

• Copper is the wiring that connects the present to the future. Global demand for copper is expected to double by 2035¹ driven not only by traditional sources of demand such as construction and infrastructure, but also by the adoption of new technologies that support a transition to a low-carbon economy, including electric vehicles, solar panels, and wind turbines.
• Copper is currently supply constrained due to geographic concentration and declining ore quality. This combination will likely drive higher prices but also create innovation opportunities in mining technologies and next-gen recycling that address the supply-demand gap.
• Investors looking for copper exposure may want to consider ETFs that offer access to companies focused on the exploration and mining of copper.

Just as copper tools helped ancient civilizations emerge from the Stone Age, copper wiring plays a critical role in the world’s transition to a low-carbon economy. Copper is used in electric vehicles (EVs) and power grids, as well as in traditional infrastructure such as telecom wiring, plumbing and HVAC.

Consequently, there is a secular demand surge for copper — driven not just by a low-carbon transition, but also the megatrends of rapid urbanization and emerging global wealth. As the “metal of electrification,” copper connects the past and future — generating exciting potential opportunities for investors.

Global refined copper demand

Copper is durable, malleable and an excellent conductor of heat and electricity. Demand for copper is forecast to grow from 25 million tons today to 53 million by 2050, driven by three key factors:¹

First, the electrification of transport, is projected to have the largest impact on copper demand. EVs require nearly 2.5x the amount of copper used in internal combustion engine (ICE) vehicles across electric motors, batteries, and charging infrastructure, and EV sales are projected to grow 35% in 2023.^1,2

Second, copper demand from power grids is projected to grow nearly 5x by 2050.³ Thanks to its unmatched conductivity and corrosion resistance, copper is used extensively in power distribution and transformers, particularly underground and subsea lines, and is needed to upgrade aging transmission infrastructure.

Third, the shift toward renewable power generation technologies such as solar and offshore wind — which require 2x and 5x more copper, respectively, per megawatt of capacity vs. gas and coal — should further increase demand.¹ 

In addition, the growing demand from building construction, appliances, electrical equipment, and cell phones, is still projected to account for 58% of copper usage by 2035.¹ As emerging markets continue to grow wealthier, and urban populations expand, copper is crucial to meet the demands of a growing middle class for electronics as well as the building needs of a rapidly urbanizing world.

Forecast supply deficit, refined copper

Copper — a soft, red-colored metal — is extracted alongside rock from copper-rich ore deposits in underground or open-pit mines. The world has approximately 870 million tons of untapped copper deposits.⁴ By the early 2030s, demand could outstrip the current supply by more than 6 million tons per year for two key reasons:

First, geographic concentration risk for copper production is high. Chile and Peru alone account for 40% of output.⁵ These countries possess some of the world’s richest copper reserves and best-established mining operations. However, political instability, labor disputes and economic challenges in the region periodically disrupt supply and lead to shortages and price fluctuations.

Second, existing copper mines are approaching production peaks. As high-grade ores become depleted, mining operations extract lower grades. Miners must now use grades of 0.5% copper (a measure of how much copper is present in rock) — a quarter the concentration of a century ago.⁶ As a result, more rock needs to be processed to extract the same amount of copper, raising extraction costs.

As a result of these constraints, global copper output in 2022 was 21.8 million tons, rising only 1 million tons over the previous three years and is expected to peak by the mid-2020s.⁷

While there is no quick fix on copper supply, technological innovations are coming. For example, sulfide-leaching technology leverages special chemical solutions to extract copper from rocks. This approach enables efficient extraction by dissolving copper and separating it from rocks, increasing yield. Leaching technologies offer a pathway to recover primary copper from ores with grades of less than 0.25% — grades that are currently considered waste.⁸

In addition to technological advancements, government policies will play a role. In the U.S., the Biden administration announced $39 million to fund projects that support domestic supplies of critical minerals required for the transition to a low-carbon economy including copper, lithium, and nickel.⁹ The European Union tagged copper as a strategic material as part of the Critical Raw Materials Act, with an aim to ensure speedier permits and easier access to capital.¹⁰ These are steps that could increase copper supply in the future.

Finally, recycled copper will likely become a more important source of supply as primary copper output growth stalls. More than 30% of global copper demand was met with recycled copper during the last decade, and we expect this to grow as innovations in sorting, separation and refining technologies enable higher recovery rates.¹¹ This circular economy approach also reduces energy consumption and environmental impacts associated with primary copper production.

Investors seeking to capture the copper theme may want to consider ETFs that offer pure-play exposure to copper miners, as well as the firms developing next-gen technologies to support supply such as copper-leaching chemicals and recycling. 

As the world electrifies, urbanizes, and grows wealthier, demand for copper will be challenging to meet, potentially bolstering the price of the metal. At the same time, the implementation of innovative mining and processing technologies, policy support, and investments in recycling, may help drive innovation. As the “metal of electrification,” copper connects the past and future. Likewise, ETFs that offer exposure to copper mining can be quite electrifying for portfolios, helping investors access the potential opportunities of tomorrow.