WoodMac warns that replacing China in the copper supply chain is 'unfeasible' as the West seeks a shift.

• The energy transition could be delayed and costs could increase if Western economies move away from China's copper supply chain, according to Wood Mackenzie.
• A mining expert stated that although supply chain risks can be reduced in different countries, China's significant influence in the downstream supply chain makes it impossible to completely replace it.

According to Wood Mackenzie, diversifying away from China's dominance in copper could delay the energy transition and increase costs, and completely replacing it would be unfeasible.

The critical metal copper, which is essential for emerging technologies such as renewable energy, energy storage, and electric vehicles, is primarily sourced in China.

The dual objectives of decarbonization and reduced dependence on Beijing are in conflict with each other, as the U.S., Canada, Australia, and European countries attempt to replace China's dominance in the copper market through subsidies and investment.

According to a report released on Thursday by a natural resources' data analytics firm, replacing China's copper processing and fabrication capacity would require hundreds of billions of dollars in new capacity. The firm also predicted that demand for copper could increase by 75% to 56 million tons by 2050.

The energy transition would become more expensive and time-consuming if inefficiencies were created.

According to the International Energy Agency, a potential shortage of copper may occur by 2030 as existing mines and projects under construction will only meet 80% of the metal's needs.

The majority of the world's initial mining of raw materials takes place in the Americas and Africa, with China accounting for only 8% of global production, as per Wood Mackenzie.

Despite the increase in China's overseas mining assets, the country will still need to acquire more resources to fulfill its demands. The rest of the world has sufficient primary mine supply to meet current requirements, according to the report.

The copper supply chain encompasses several crucial stages, including mining, smelting and refining, fabricating, and the production of finished products.

China's dominance in downstream processing and manufacturing is what sets it apart from the rest of the world, which relies heavily on copper mines, according to the report.

It is essential to take into account the entire supply chain, not just mining operations, when governments and manufacturers seek to diversify away from China, according to Nick Pickens, research director of global mining at Wood Mackenzie.

"Despite efforts to reduce copper supply risks and some rebalancing in different countries, China's overwhelming dominance in the supply chain makes it impossible to completely replace it."

Copper concentrate, which is produced by 80% of copper mining, must be processed at smelters and refineries to create copper cathode. This material is then used by fabricators to make copper components that eventually end up in finished goods.

Wood Mackenzie's data shows that China has accounted for 75% of the global smelter capacity growth since 2000.

Pickens stated that a copper supply chain without China would necessitate a significant increase in processing capacity to achieve energy transition goals.

In North America and Europe, there are no plans for new primary smelting capacities, but the U.S. has shifted its focus to secondary markets and copper recycling, with the establishment of its first secondary smelter for multi-metal recycling.

Since 2019, China has accounted for approximately 80% of global additions in copper and copper alloy fabrication capacity, and currently possesses half of the world's fabrication capacity.

Efforts to subsidize critical mineral investments, such as those outlined in the Inflation Reduction Act (IRA) in the U.S., have faced challenges when it comes to copper. Factors like low utilization, high operating costs, and environmental regulations have made it difficult to achieve the desired outcomes in both the U.S. and Europe, according to a report.

To achieve net zero goals without imposing excessive costs on taxpayers, pragmatism and compromise will be necessary. One concession that could be made is easing global trade restrictions, as suggested by Pickens.