With the threat of drought caused by climate change, copper production may be impacted, which has a significant risk to the structure of technology industries, especially the highly dependent semiconductor supply chain for copper. On the other hand, the market's demand for copper is expected to continue to grow, further increasing the imbalance of supply and demand.
According to the latest PwC report, copper mining operations need to rely on stable water sources, and the world's major copper regions are facing increasingly severe drought risks, which is closely related to climate change. The report notes that 32% of global semiconductor production may face temporary climate change-related copper supply disruptions, which will be four times the current rate.
The report pointed out that improving supply chains is imminent. Although some companies have begun to take action, most investors still believe that companies should speed up their pace, strengthen risk control, and suggest that mining companies can relieve supply pressure by building seawater desalination factories, improving water efficiency and water resource recycling.
Currently, semiconductor manufacturers can consider using alternative materials, diversified supply sources, and introduce recycling and recycling economic mechanisms to reduce dependence on a single raw material.
This may be a light for telecommunications operators, as they are gradually phased out old copper wire communication equipment and turn to optical networks. According to an estimate last year, there is an opportunity to "recycle" 800,000 tons of copper from scrapped copper lines in the next decade, with a market value of up to $7 billion.
According to S&P Global's 2022 report, global demand for copper is expected to double from 25 million tonnes per year to 50 million tonnes in 2035, and the current copper supply rate may not keep up with this growth curve.
Another solution is to develop more copper mines, but it is generally 16 years to develop a new mine, which means that even if the new mine is now launched, it will not be able to catch the expected surge in demand. According to the analysis of S&P, it is impossible to replenish the supply and demand gap by recycling copper.
Therefore, the frontal impact of copper is due to the continuous increase in demand, and the climate change threatens its supply stability. Fatih Birol, executive director of IEA, said when interviewed by The Guardian that one of the things to do is to develop countries to strengthen the refined capabilities of copper and other key metals, and at the same time establish partnerships with developing countries to jointly expand new supply sources.
PwC South Korean Semiconductor Global Responsible Glenn Burm pointed out, "We can now take action to understand and manage supply risks, including the real risks brought about by climate change. Companies around the world should challenge challenges by improving water resources capacity, diversifying supply chains, and enhancing climate potential. Although there have been significant progress, companies can and should do more."
At the same time, US President Trump announced that he would charge 50% tax on imported coppers. As soon as the news came out, New York copper futures rose 17%, to a record high of $5.89 per pound, the largest market share in 1989. I believe that all of these news will affect the supply and demand status of copper.
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