The holder of a PhD in International Economics and Development warned that there are no clear signs of a significant recovery in copper supply until new projects begin operating, something he does not foresee before the end of the decade.
The global copper market could continue to face tight supply until the end of the decade, amid structurally higher demand, production difficulties at major operations and an insufficient number of new projects coming on stream to provide additional capacity to the market.
This was the assessment of Juan Carlos Guajardo, who holds a PhD in International Economics and Development from the Complutense University of Madrid, during an exclusive interview with Rumbo Minero Central, in which he discussed the outlook for copper, high metal prices and the challenges facing producing countries.
For Guajardo, the current situation is not solely the result of short-term factors. There is an underlying shift linked to technological and geopolitical transformations that are driving greater consumption of mineral resources. “We are experiencing a global transition involving technological and geopolitical factors that point toward greater consumption of metals, with copper probably being the strongest case, but also including other metals such as gold, rare earths, etc.,” he explained.
The specialist noted that this increase in demand coincides with growing difficulties in developing projects and maintaining production levels, a combination that is supporting prices. “We are seeing that it is increasingly difficult to develop projects and increasingly difficult to maintain production, and that combination of high demand and supply difficulties results in high price levels,” he said.
Copper could face tight supply until the end of the decade
Guajardo said that the past two years have been marked by a succession of production problems at major international copper operations.
Among the cases, he mentioned Grasberg, in Indonesia, where flooding affected one of the world’s largest copper mines, as well as Kamoa-Kakula, in the Democratic Republic of the Congo, which also experienced problems caused by flooding.
He also cited the accident at El Teniente, whose effects on production, he explained, have persisted. “We have been experiencing a succession of production problems,” he said.
According to the specialist, some of these difficulties will continue to affect the market, and for now there are no sufficiently clear signs of a production recovery capable of substantially increasing copper availability. “There are no clear signs that there will be a production rebound until new projects begin operating and provide a buffer against the production difficulties we are experiencing,” he said.
The problem is that this new capacity would not emerge immediately either. According to Guajardo, the wave of new projects needed to give the market more breathing room is not expected until the end of the decade. “My view is that we will face a very tight supply situation, with many surprises, probably until the end of this decade,” he said.
High prices could have a structural component
Tight supply coincides with demand for metals that Guajardo considers structurally higher than in previous periods. He therefore argued that the current price cycle could have more lasting characteristics.
“We are probably facing a much more permanent and structural situation of high prices,” he said. This does not mean, he clarified, that prices will continue rising without interruption.
Metal markets will continue to experience periods of rising and falling prices, but Guajardo believes these fluctuations could occur at levels above those seen historically. “Metals always have periods of highs and lows, but probably with a higher floor than we have had historically,” he explained.
Peru and Chile account for around 40% of global copper production
Against this backdrop of higher demand and supply constraints, Guajardo highlighted South America’s continuing strategic importance within the global copper industry.
According to the figures cited by the specialist, Chile and Peru account for approximately 40% of global copper production, while Latin America represents around 45%. Argentina’s potential adds to this.
Guajardo estimated that the country could increase its production by around one million tonnes of copper over the next 10 to 15 years. “The heart of copper supply lies in this southern part of the Americas,” he said.
The specialist believes that this concentration of resources creates opportunities to move toward greater cooperation among the region’s leading producing countries. “There is considerable logic in trying to find synergies among countries in the Americas,” he said.
Infrastructure and suppliers create opportunities for integration
Guajardo identified infrastructure and supplier development as two areas where Peru, Chile and other countries in the region could find opportunities for cooperation.
“There are opportunities for improvements in infrastructure and opportunities for supplier development,” he explained.
According to the specialist, greater coordination could help South American countries develop their production more efficiently and accelerate the addition of new tonnes to the market. The aim would be to meet international demand that requires greater availability of minerals, particularly copper.
This is an especially significant challenge considering that, despite high prices and the demand outlook, developing new mines remains a complex process.
Permitting procedures and conflicts make it difficult to turn projects into mines
Guajardo identified project execution as one of the main problems currently facing the industry. The specialist argued that there is a gap between having mineral resources and successfully turning them into new production capacity.
“We have a problem turning projects into productive resources—that is, how to execute projects in an efficient and viable manner,” he said.
As he explained, the processes required to build new mining operations have become increasingly complex in recent years.
Among the difficulties, he mentioned community, Indigenous and environmental conflicts, as well as bureaucratic obstacles. “The much-discussed permitting bureaucracy has created many complexities for project development,” he said. Added to this is another problem: financing.
Guajardo acknowledged that it may seem contradictory that, in a context of high prices and growing demand for minerals, securing funds to finance new developments remains difficult.
“The reality is that finding financing for mining projects is not easy,” he said.
However, he believes this situation could begin to change because of the growing interest of major powers in ensuring access to mineral resources.
That geopolitical interest, he noted, could create stronger incentives to facilitate project financing.
The challenge: turning resources into additional tonnes of copper
For Guajardo, the industry’s central problem is therefore not limited to finding new deposits.
It will also be necessary to secure financing, reduce the difficulties that delay projects and ensure that identified resources can effectively become commercial operations. “Ultimately, it is about how projects are turned into commercial operations. That transition has become increasingly difficult,” he said.
The specialist believes that this is precisely where there is considerable room to improve conditions for the industry’s development.
The urgency is growing in a market where demand continues to increase, while supply faces production disruptions and the next major wave of projects could still take several years to materialize.
In this scenario, Peru and Chile take on particular importance because, according to Guajardo, they account for close to 40% of global copper production, while Argentina could add around one million tonnes over the next 10 to 15 years.
According to the specialist, taking advantage of that position will require South America to improve infrastructure, develop suppliers, facilitate project execution and find mechanisms for cooperation that enable it to produce “better and faster.”
Unless the development of that new capacity accelerates, his outlook is that the market will continue to face very tight copper supply until the end of the decade, while global technological and geopolitical transformations continue to increase the need for minerals.
Source: Rumbo minero