A raw material that is already in short supply and a mega-merger is about to take place on the market. Polish giant at risk?

At the end of April 2024, information about the offer submitted by BHP Group to take over Anglo American was reported in the global media. If the merger is successful, a multi-commodity company will be created, the share of which in the copper market will exceed both Chilean Codelco and Freeport-McMoRan, reaching approximately 10%. global supply. How will this affect KGHM Polska Miedź SA? And will only the Polish copper giant be affected by this merger?

Copper market in the first quarter of 2024

Copper (chemical symbol Cu) is an essential raw material in our near future. The energy transition requires huge amounts of the red metal. According to the International Energy Agency (IEA), in 2050 we are expected to obtain 90% of global energy. energy from renewable sources (RES).

The main sources of renewable energy are wind and solar power plants. Depending on the type and location, obtaining one megawatt (1 MW) of energy from the mentioned renewable energy sources requires the use of from 2,500 to even 9,500 kilograms of copper!

Eco-friendly cars also require increased amounts of this metal. An average combustion car contains between 20 and 25 kilograms of copper. Hybrid cars require from 40 to 60 kilograms, while an electric car requires over 80 kilograms of copper to function.

IEA forecasts for 2020-2030 indicate that the demand for copper in wind farms will increase by almost 3.5x, in the case of photovoltaic panels it will be 4.75x, and for combustion cars the increase in demand will be over 17.8x! And this in just a decade.

Current forecasts assume that this market will be in permanent deficit for the coming years, starting with a minimum deficit of 80,000 tons in 2024. Social changes, in addition to climate change, are also problematic for this raw material. In the second half of 2023, the Panamanian authorities, under pressure from local communities, closed the largest copper mine in the country, Cobre Panama. The mine supplied 350,000 tons of copper, which in 2022 put it in tenth place in terms of copper extraction in the world. The presidential elections in this country also do not favor a change in the decision on Cobre: three leading candidates announce that the decision will be maintained, and the fourth wants a citizens' referendum on this matter.