Source: Zhitong Finance
Even under the optimistic 2050 low emissions scenario, more than half of the world's copper mines will be located in regions facing significant, high, or extreme droughts.
Recently, PricewaterhouseCoopers released a report stating that the demand forecast for copper needed for the clean energy transition has pushed copper prices to a two-year high. At the same time, the agency also emphasized the risks posed by climate change to future metal supply.
The report shows that even under the optimistic 2050 low emissions scenario, more than half of the world's copper mines will be located in regions facing significant, high or extreme risk of drought. The study found that the two other energy transition metals lithium and cobalt had a higher risk of droughts, reaching 74%.
In recent months, as copper is struggling to meet the growing demand for electric vehicles, grid infrastructure, and data centers, the market is betting that there will be an impending shortage of copper, and the price of copper has soared to more than $10,000 per tonne. At the same time, new deposits are becoming harder and more expensive to mine, and increasingly stringent scrutiny of environmental and social issues is hampering investment.
Furthermore, climate-related disruptions increase another layer of supply risk. The impact of rising temperatures and changing weather patterns on agricultural products is widely known, but the impact on minerals is less well known. Zambia's copper mines have disrupted hydropower facilities due to the drought, and are facing a tight electricity supply problem. In Chile, as the copper mining industry invests in the use of seawater, water scarcity has limited copper production in recent years.
Notably, of the nine commodities studied by PwC, at least 40% of the global supply for each commodity comes from no more than three countries. As far as copper is concerned, Chile, Peru, and China account for more than half of production.
Emma Cox (Emma Cox), head of global climate at PwC UK, said in an interview: “This means that if climate change causes damage, due to lack of distribution, it may have a disproportionate negative impact. I don't think everyone is aware of the effects and dependencies of future climate change.”