Irina Slav
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
More Info
Premium Content
By Irina Slav – Aug 17, 2024, 6:00 PM CDT
- The West’s green energy transition is heavily reliant on copper, a metal primarily processed in China.
- Building a Western copper processing industry would be costly and time-consuming, potentially hindering the transition.
- Western governments may need to cooperate with China or face significantly higher costs for renewable technologies.
Copper, the key transition metal, hit a price of $11,000 per ton a couple of months ago. Goldman Sachs forecast it could surge all the way to $12,000 as electrification really gets going—because there are not enough copper mines.
Yet, the lack of mining capacity is just one problem for the transition. The other, at least in what is commonly referred to as the collective West, is copper processing capacity. Most of it is in China. Without it, the transition will stumble and possibly collapse.
“No China, no transition,” Wood Mackenzie said in a blunt new report about the global state of copper. The consultancy predicts a 75% increase in the worldwide demand for the metal by 2050, which would naturally necessitate a boost in mining investment. It would also require a boost in refining investment—outside China. And that will cost an estimated $85 billion, according to Wood Mac.
That China dominates virtually every aspect of the transition industrial complex is hardly news. The country is the biggest solar power and wind turbine producer. It is the biggest market—and manufacturer—of electric cars. It has the world’s biggest rare earth refining capacity. China is the transition, in a way. And the rest of the world has been happy to outsource its heavy industries to China until recently. Now, the West has realized it might be a good idea to be more self-sufficient and less reliant on others when it comes to industries dubbed critical, especially if you have certain geopolitical differences with those others.
The problem is that the West is about two decades late to the transition party. Building a copper refining industry from scratch would take time, money, and resources that governments in Europe, the U.S., Canada, and Australia simply do not have—especially money.
“Governments and manufacturers that seek to diversify away from China need to consider the full supply chain, not just mining,” Wood Mac analysts wrote. “Hundreds of billions of dollars in new copper processing and fabrication capacity would be required to replace China.” This might sound like a sacrifice worth making but, the analysts continued, “This would create inefficiencies that would result in significantly higher-priced finished goods and increase the cost and timeliness of the energy transition.”
The Western governments in service to the energy transition,