Peak Copper | Red, Hot, and Running Out

The Issue

As of now, copper reserves in the world are still high, but unfortunately, copper demand is growing. According to the U.S. Geological Survey, in 2005, there were an estimated 950 million metric tons of world copper reserves, which would last for another 63 years. In 2008, copper production reached 18.4 Mt (metric tons) and in 2009 it was forecasted to be 19.2 Mt. However, these figures also include the amount of copper that was recycled, which is quite a significant portion. As for the demand side, world usage of copper in 2008 was 18.2 Mt and was forecasted to be 18.9 Mt in 2009, an increase of 3.4%. To add to that, almost 95% of copper ever processed has been extracted in the 20^th century.

The reasons for this growing demand include enormous population, technological and industrial growth throughout the world. Copper usage has increased exponentially and will only increase in the years to come due to growing demand from emerging markets (e.g. the BRIC nations). At this rate the reserves of copper are bound to start dwindling and prices are bound to shoot up, which means that in the long run, this metal will not be viable, or even worse we may run out. The consequences of this are obvious. First, we will lose the various benefits this metal provides to our society, such as those above-mentioned uses. There will also be unemployment and sectoral shifts in the industry due to a changing reliance on different metals. This will lead to inefficiencies in the market and could cause another economic downturn, or an even worse one, if coupled with other resources shortages, which are bound to occur in the future.

This is why we must understand the concept of “Peak Copper,” which refers to the time when the reserves of copper are fully depleted. As one study estimated, this could be as soon as the year 2068. As university students, this may not seem to be an issue right now but in the later years of our lives, resource shortages such as that of copper could have a great impact on our lives.

The Writing on the Wall

According to one study, if the entire world were to live at same standards as North America, meaning they would have same infrastructure for power transmission, construction and other areas where copper is used, then we would not have enough copper to meet that demand. This is troubling since the average rate of copper usage per person seems to be rising in developing countries (likely due to the fact that more electronics are consumed as incomes rise).

The silver lining though is that our neighbour, the US, is quite secure and lucky as it has large reserves of copper. In the long run, it is self-sufficient because these reserves will probably be enough for future demand, since the process for recycling copper is quite easy and cheap. Canada meanwhile, also has large deposits of copper as well but most of the production is exported. In Canada, the main deposits of copper are in Sudbury, Ontario and in various areas of British Columbia and some other provinces. The copper industry is worth 1.6 billion in Canada and is dominated by two main players: INCO and Noranda Ltd., who refine copper in Sudbury and Montreal respectively.

As well, current world reserves are still high and technology is continuously becoming ever more efficient at mining. 2068 is only an estimate, one of a few, some predicting copper reserves (e.g. using the broadest definition for reserves) at up to 1.6 billion metric tons globally.

When copper shortages do occur it might be possible for us to find substitutes for copper or discover new ways or technology for mining copper reserves that are not currently accessible due to economic or technological constraints.

As Canadians, we need to especially consider this in our decision-making, because Canada has quite a large resource industry and future reserves of commodities such as copper will have a large impact on our economy.

ARB Team
Arbitrage Magazine
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