A Rosy View from the Patisserie: Copper Resource Peaks and why they keep failing to materialize

Malleable, relatively stable, and second only to silver in its electrical conductivity, copper is used extensively in electronics, communications, machinery, and plumbing – the cornerstones of western society and industry. Given this significance, it is perhaps not surprising that this metal and its finite reserves often figure prominently in discussion of resource limitations on the horizon of the modern age.

In his April 2012 review of post-global financial crisis metal consumption around the world, Gary Gardner of environmental research organisation the Worldwatch Institute presented a cautionary tale on this score, suggesting:

“…a potential future global population of 10 billion people could consume 1.7 trillion kilograms of copper total, [which is] greater than the estimated global in-ground stocks of 1.6 trillion kilograms.”

While certainly arresting in its implications, warnings such as Gardner’s are hardly new. Environmental analyst Lester Brown suggested in 2007 that “Based on reasonable extrapolation of 2% growth in demand per year, copper might run out within 25 years”. While Brown’s prominence as an environmental advocate might leave him open to accusations of a biased perspective, the same cannot be argued of Megan Clark – who contributed a related headline of her own that same year: “Over the next 25 years, world consumption of copper will exceed all of the copper mined today”. Clark, as then Vice President for Technology at BHP Billiton, and later Chief Executive at the CSIRO – Australia’s peak government scientific research organisation, could certainly not be accused of standing as any sort of apologist for the anti-industrial lobby.

The logic of cautionary warnings on copper consumption is circumstantially compelling. Demand for copper globally is growing – driven in particular by rapid industrialisation in the developing world. Average copper consumption per year in developed countries is around 10 kg/person. In developing countries it is only one fifth of that level. The difference lies not in the extremes of consumerism, but the infrastructure underlying the key lifestyle differences between developed and developing nations. Forget cars and cappucinos – we’re talking washing machines, fridges, mains electricity, and indoor plumbing. For burgeoning urban populations in the developing world to meet these basic elements of a western middle class lifestyle (assuming – and it is an important assumption that we shall return to – that they do so by the same technological route), copper consumption must rise accordingly.

And yet, despite these well-reasoned foundations, predictions of the imminent exhaustion of global copper reserves and an inexorable decline in production have proven wide of the mark time and again. As early as 1924, US geologist and copper mining expert Ira Joralemon was predicting darkly that:

“… the age of electricity and of copper will be short. At the intense rate of production that must come, the copper supply of the world will last hardly a score of years….Our civilization based on electrical power will dwindle and die.”

World markets today though – for all the rising demand – are not decrying a shortage of this strategic metal. Prices over the opening years of the 21st century have not rocketed skyward as nations and industries compete for declining stocks. Quite the reverse.

In 1980, economist Julian Simon made a widely publicised wager with Paul Ehrlich, author of the influential environmental essay “Population Bomb”. In this bet, Ehrlich, perhaps channelling the catastrophist spirit of 18th century English scholar Thomas Malthus, backed the price of a package of industrially important metals – copper, chromium, nickel, tin and tungsten – to rise over the following ten years because of increasing population pressures depleting resources. Simon, holding the other side of the wager, predicted that the price of the metals would instead decline, because any imminent resource scarcity would spur greater innovation, leading to the discovery of new sources and technologies to increase the efficiency of supply. Ehrlich famously lost the bet, with prices on all five metals falling in constant 1980 dollar terms – and indeed, for three of the five in absolute (unadjusted) dollar terms.

What’s going on? Global population increased over the ten years to 1990, as did urbanisation, and per capita consumption of these industrially sensitive metals. How were we able to swim against the tide of supply and demand like this?

We didn’t. Fundamentally, while metal demand has been increasing throughout the late 20th and early 21st centuries, supply has increased even more to tip the economic scales back the other way. As you can see here, even as global demand and production have ramped up over the past 50 or so years, estimated stocks of copper – measured as the number of years declared and proven reserves will last at current rates of use – have remained more or less constant.

Ratio of global declared copper reserves to rate of production over the years 1900-2010. This ratio provides a measure of the number of years of supply remaining at current rates of use. Figure produced by MinEx consulting from production data sourced from the United States Geological Survey, and reserve data calculated by MinEx.

Some of the additional reserves come down to increased exploration – deeper, further, by more efficient techniques, and in new regions – locating new ore bodies. A far greater source of additional resource however comes from changing commodity prices and more efficient mining and processing techniques quite literally inflating the size of existing deposits. Alchemy? No – to put it simply, what is ore? Ore is mineralised rock from which the resource content can be economically extracted. The key here is ‘economically’. If the value of the resource changes – the price goes up or the cost of producing it falls – so does the definition of what constitutes ore, which is effectively what someone will go to the trouble of digging up and processing to make it available to the market. And there is more low-grade material out there than high-grade. A lot more. As we see in this figure – again compiled by MinEx consulting – decrease your copper resource grade cut-off by a factor of 2 and you typically increase reserves of the metal on the order of 10-fold.

Variation in estimated resource tonnage (in millions of tonnes of contained metal) with cut-off grade for 48 copper deposits around the world. As the boundary of what is economically viable to extract falls, so the volume of rock qualifying as ore and the corresponding tonnage of the resource increase. Graph produced by MinEx consulting, March 2010.

So are we to be saved by the glories of economics? Will a virtuous circle of supply, demand, and value keep us in a red blush of coppery happiness indefinitely?

Well, in the words of US Economist Kenneth Boulding, “Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist.”

When you dig a little bit deeper (metaphorically speaking), the primary limiting factor in this equation is not actually the availability of copper itself. If we chose to, we could go on extracting the stuff for centuries to come without pausing for breath, pulling ever lower grades from ever larger holes in the ground. Rather, the issue is externalities – a useful economic parameter describing costs incurred by someone who did not agree to the causative action, and not transmitted through prices.

Fundamentally, copper mining is of direct benefit to the miner – who makes money from the process – and to the purchaser of the metal, who gets a raw material supplied to meet their needs. A much wider segment of society though experience detrimental effects as a result of the mining that, while typically not formally costed in the economic transaction, are still very real and can accumulate to significant effect.

Copper for example – as with any mined resource – incurs a significant ecological footprint, amounting to some 35-45,000 litres of water and 15-30 GJ of energy used and 3-6 tonnes of CO2 emitted per tonne of metal produced at current grades. In Chile – admittedly a country with a mining-intensive economy – copper alone accounts for 11% of total national energy use – 32% of electricty use and 6% of all fuels – and the government was forced to call for water use efficiency pacts with copper mining companies during national shortages in 2009.

Increased scale or intensity of mining under such conditions imposes a cost on all of society, in the form of price rises and shortages of other key commodities. Societal tolerance of these costs is not infinite – miners cannot simply keep digging ever deeper (literally, this time) and expect the society in which they operate to accept the externalities arising as a consequence.

In his book ‘Collapse’, Jared Diamond writes eloquently of a host of civilisations throughout human history that have grown, prospered, and then hit a wall of resource limitation that has brought them crashing to the ground.

With this sort of history in mind, Paul Ehrlich – never one to go quietly, it must be said – wryly opined after losing his famous wager “The bet doesn’t mean anything. Julian Simon is like the guy who jumps off the Empire State Building and says how great things are going so far as he passes the 10th floor.”

So yes, resource limitations may indeed yet come back to bite us as societal tolerance of mining is exhausted.

What would be the consequences then if this were to happen – if something like copper were to become a resource deficit for our society? For a resource limit to move from inconvenient to truly devastating, that resource must be more than desirable, it must be irreplaceable and core to social function. The critical question in our case thus becomes: if we do run out of copper, what are the implications of this for our society? As already discussed, we love this soft red metal for a host of reasons. Is it truly irreplaceable for any of these manifold uses though?

The stability and conductivity of copper make it ideal for use in electrical wiring – but not uniquely so. Even leaving aside the superior gold and silver on cost grounds, humble aluminium is an able, albeit slightly more brittle, substitute – and has proven eminently suitable for cabling and wiring applications. The malleability and low reactivity of copper make it ideal for use in pipes and plumbing – but again, not uniquely so – with plastic pipes every bit as effective – in some applications even more so. Indeed, in each and every one of the categories dominating our use of this metal, viable alternatives exist that could step up to the plate should an existential crisis arise that removed copper from our society tomorrow.

To put this in some kind of perspective – I like croissants. I can’t think of a nicer way to start the weekend than a couple of these delicious pastries and a freshly brewed coffee at my favourite beachside cafe. If they suddenly ran out though – if every French baker the world over were laid low, perchance by some virulent cheese-borne virus engineered by the militant wing of the UK Independence Party – robbing us of these wonderful buttery treats, it wouldn’t be the end of the world. It might not be quite as nice, but I could always have toast with my morning coffee – or even move on to an entirely new resource family and try muesli.

So it is with copper. This metal has many fine properties that have allowed it to make an important and highly valued contribution to the fabric of our industrialised society – but even if a shortage were to develop, viable alternatives exist for all its major uses. They may not always be as effective as copper, and certainly no single resource stands out as able to fill all of the niches that copper is applied to, but nevertheless, there are no yawning gulfs that threaten to bring any of the pillars supporting western society crashing to the ground.

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