BHP's $39B Bid Amid Copper's Climb to $10K Signals Supply Crunch

Key Takeaway

• BHP's $39 billion bid for Anglo American highlights the mining industry's struggle to meet rising copper demand for EVs and infrastructure.
• Over $150 billion in investment needed by 2032 to address copper supply gap, with current production set to decline sharply.
• Copper prices surged to $10,000 a ton amid fears of future shortages, despite current adequate supply.

Copper's Surging Demand

Copper prices have soared to $10,000 a ton, driven by a core industry disconnect: the lack of sufficient mining investment to meet the burgeoning demand from electric vehicles (EVs), grid infrastructure, and data centers. BHP Group's $39 billion bid for Anglo American Plc underscores the industry's bullish outlook on copper, aiming to become the largest copper producer. However, this move does little to address the looming supply gap. Existing mine production is anticipated to decline sharply, necessitating over $150 billion in investments from 2025 to 2032 to meet global supply needs, as per CRU Group.

Investment Shortfall

The industry faces a significant challenge in ramping up copper production due to underinvestment. High-quality deposits are increasingly scarce, funding for small explorers is drying up, and resistance to mining on social and environmental grounds is growing. Costs for labor, equipment, and materials have surged, complicating new mining projects. Laura Whitton of BHP highlighted the difficulties in copper mining, pointing to reliance on older mines with lower ore grades. Despite current adequate supply, the market is bullish, with predictions of copper rallying to unprecedented levels due to expected shortages.

The Financing Dilemma

To justify the hefty investments required for new mines, copper prices would need to reach $12,000, according to Olivia Markham of the BlackRock World Mining Fund. However, investor reluctance to fund new projects remains a hurdle. Past trends show miners preferred increasing dividends over boosting spending when copper prices hit $10,000. China, a significant player in increasing global copper supply in the past decade, faces its own challenges in continuing to drive supply growth, indicating a broader need for investment in mine capacity.

Street Views

• Bernard Dahdah, Natixis SA (Bullish on copper):

  "Copper looks like the last remaining supply risk for the EV industry. In a net-zero scenario, we’re going to need a vast amount of copper, and we’re going to need a different strategy to boost supply."

• Olivia Markham, BlackRock World Mining Fund (Bullish on copper):

  "Miners would need $12,000 copper to justify spending on new mines."

• William Tankard, CRU (Bullish on copper):

  "There is a clear and compelling need for additional mine capacity to be brought online. The gauntlet is being laid down at the feet of the miners, and it’s going to be exceptionally challenging to deliver."