2024-04-30 09:08:20
The largest mining group in the world, the Australian BHP Billiton, wants to grow further by buying its competitor Anglo-American, which has so far declined its offer. A madness of grandeur fueled by the surge in copper prices.
With the energy transition, the red metal has changed color: it now belongs to the category of so-called “green” metals, those which are essential for decarbonization. We need nickel, lithium and cobalt for this transition, but also copper, a lot of copper for the electrification of our energy systems. This new demand, which has been increasing steadily for fifteen years, is fueling the spectacular rise in prices. On the London metals market, the price of copper jumped 18% in two months. On Friday, it crossed the $10,000 per ton mark.
Read alsoThe price of copper at its highest in 14 months
Astronomical lessons
Copper sales from Anglo-American, which is very present in Chile and Peru, the two largest producers alongside China, have exploded. They increased by 30% between 2022 and 2023. It is this income that the Australian giant hopes to capture. He put $39 billion on the table. Not enough respect for the coveted group.
The Anglo-American also knows the issues. The two entities combined would alone hold 10% of the world’s copper supply. Enough to ensure a comfortable income for the next twenty years. Because demand will continue to rise. Between 2010 and 2024, production jumped by 8 million tonnes. Without quenching the thirst for copper.
A supply deficit in perspective
A deficit could even occur as early as this year, several analysts predict. According to the CRU firm, an additional 4 million tonnes would need to be extracted by 2030 to meet potential demand. But instead of growing, supply will start to decline from 2027, due to lack of sufficient investment in the opening of new mines. Deposits rich in ore are increasingly rare, their exploitation increasingly costly and very time-consuming. It can take 10 years to raise funding, obtain permits and overcome growing hostility from local populations. The prevailing drought also threatens production in half of the active mines, warns PWC. Not a very reassuring outlook for copper consumers, and therefore for the essential energy transition.
A worrying mega merger for consumers
The upcoming mega merger will not necessarily help things. In the immediate future, consumers are especially concerned that it will worsen the problem. By holding such a large share of the supply, the new juggernaut could impose its prices in defiance of its rivals. The Chinese buy half of the world’s copper production. It is difficult to see them allowing a merger to take place which would reduce their negotiating power. They will be consulted and will obviously give their opinion on the operation. BHP Billiton also has to deal with the hostility of the South Africans. In the immediate future, the Australian is preparing a more attractive offer. With, of course, an eye on the market. Copper could easily rise to $12,000 per tonne within two years.
Also read Copper: new price records coming?
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