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Copper Supply Chain Segmentation

There are three main components of the mining supply chain: exploration, mining and processing. Across this chain, from my business to the marketplace, a range of different countries, companies and jurisdictions have to play a role.

One consequence of this is a highly heterogeneous supply chain that is more acutely affected by price fluctuations, geopolitical crises, and natural disasters. Therefore, it has historically been difficult for mining companies to have a comprehensive management system for integrated operations from start to finish.

Covid-19 has exposed the weaknesses of this system, as demand for commodities such as copper, iron ore and zinc has fallen dramatically. As a result, mining companies have had to reassess the resilience of their organizations and global supply chain models.

One of the most visible examples of this fragmented supply chain is the copper industry. Copper has a very narrow supply base, with 65% of documented copper resources in only five countries: Chile, Australia, Peru, Mexico, and the United States.

The narrow width base is also reflected in the copper processing. China is the largest importer and exporter of refined copper and is home to nine of the world’s 20 largest copper smelters. With such a tight supply and processing base, if one of the major suppliers fails, the entire chain suffers. This was the case in 2021 when several community strikes halted operations at the Las Pampas mine in Peru for several months.

As copper only becomes more important to support the upsurge of green energy, many solutions exist to address a fragmented supply chain.

First, miners can shift toward a customer-centric supply chain, using data and technology to facilitate a more efficient and profitable way of doing business. They also need to support recycling and repurposing projects to relieve pressure on the supply chain, and expand the supply base for the metal.

mining supply chain

Mining supply chains are very complex and represent all mining assets, including equipment, processing plants, rail operations, and ports. Further complicating matters is the wide range of processes required to bring copper from the mine to market and the separate interconnected steps within each business before the products reach consumers.

Nowadays, the mining supply chain operates within organizational silos, business divisions that operate independently and avoid sharing information. This means that the supply chain has limited coordination and data exchange, which makes it highly fragmented and not part of an integrated process.

As a result, the supply chain is vulnerable to disruptions from economic, political and natural forces. Risks have risen dramatically over recent years, as geopolitical uncertainty and changing demand for critical minerals have led more and more major deposits to be targeted in stricter jurisdictions.

extraction

Nowhere is this more evident than in an examination of the copper supply chain. Copper is very abundant and is found in a free metallic state in nature. However, their distribution is very uneven, which requires certain geological conditions. This uneven distribution resulted in a minimal supply base, with only a few producing countries. Peru, for example, accounts for 40% of mined copper, which means that if one of the major producers suffers, the entire supply chain will suffer.

However, within these major producers, the grade of ores has been steadily declining. When analyzing copper mines, the average grade of ore decreased by about 25% in just 10 years. In the same period, total energy consumption increased at a higher rate than production (46% increase in energy compared to 30% increase in production).

From 1991 to 2015, global extraction doubled, rising from 9.3 million tons to 18.7 million tons, leading to concerns about future copper availability, with several studies estimating that the peak global copper production will occur between eight and 40 years from now. .

Low grades, an extremely narrow supply base, and dwindling recoverable assets pose significant risks to the copper supply chain, further exacerbated by labor negotiations and blockades. There is now an expected shortfall in copper supply relative to demand up to 2025, when the shortage will reach 290 thousand tons.

Treat

After extraction, the copper must go through a lengthy process in order to be viable for industrial and commercial application. Copper processing includes a range of steps, including unit processes for sizing, separating, and processing minerals such as shredding, sizing, separating, dewatering, and mineral or chemical processing.

However, like its mining base, copper processing is limited in scope and the Covid-19 pandemic exposed weaknesses in this system as leading smelters began to question whether they could maintain production, sending copper prices to an all-time high. . Later, China’s imports of concentrated copper fell 1.9% year on year to 21.76 million tons in 2020, the first decline in imports since 2011.

These supply constraints counteract the increased demand for copper, which has been spurred in large part by a green energy transition, including the acceleration of the growth of electric vehicles and charging systems in the auto industry. Demand for “green copper” is only expected to grow over the next 10 years, with estimates that higher demand could increase by up to 13% year-on-year.

Supply Chain Supercharging

A range of solutions exist to relieve the pressure on the supply chain. First, stakeholders can explore the deployment of data-driven analytics and artificial intelligence, allowing companies to identify which customers represent the most significant revenue potential at the lowest cost and prioritize serving those goals. Doing so will reflect shorter cycle times, more on-time deliveries, and less need for expediting.

Circular supply chain development is also a viable option. Since the supply of primary copper is determined by mine production and smelting and refining capacity, upgrading refined copper from high-quality scrap and secondary refining capacity can provide secondary copper streams to the market.

Moving away from the traditional linear “make, use and dispose” economy to a circular economy will require increased reuse, remanufacturing, recycling and increased material efficiency.

However, since copper is a 100% recyclable metal, with 80% of mined copper still being used, the supply of recyclable copper is expected to increase. Countries such as Japan and China have made excellent progress in creating a circular copper supply chain. However, this progress seems to be local, and it will become necessary to improve the quality of communication processes – to search for new standard solutions.

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