As noted in Part 1 of this blog last week, soaring copper prices and reduced supply have implications for electric utilities related to needs for new grid structures and repairing existing grid structures, according to a new Wood Mackenzie report.

“To meet the impending supply gap over the next decade, the copper market will require an estimated 8 Mtpa or so of new capacity from greenfield and brownfield projects, as well as an additional 3.5 Mtpa from direct scrap use,” said the report. (Mtpa is million tons per annum.) Over two decades of copper-market forecasting show a steady rise in new project requirements within the next 10 years, now averaging 880 ktpa annually, double the rate from a decade ago, and accounting for an unprecedented 28 percent of projected base-case supply. The total cost to develop these projects is expected to exceed US$210 billion.

Understandably, alarm bells are ringing over the slow pace of new mine development, said Wood Mackenzie. The problem is not a lack of copper in the ground. There is a robust pipeline of greenfield projects. The problems are investment and access. “Environmental permits, social opposition and technical hurdles have put many plans and opportunities on ice,” said the report.

Western miners, constrained by investor risk appetite and environmental, social and governance (ESG) pressures, have been tentative on new mine development, preferring the regulatory stability and legal protections of Organization for Economic Co-operation and Development (OECD) jurisdictions over higher-risk regions.

This expanding shortfall, which Wood Mackenzie terms the “project requirement,” underscores the urgent need for increased output from both greenfield and brownfield developments to meet future supply needs. With demand accelerating and supply growth constrained by risk aversion, financing bottlenecks and geopolitical fragmentation, the imbalance is set to deepen further. This raises serious questions about long-term supply security and resilience.

Despite the growing need for sustained investment in supply, investor appetite for new mine development remains muted. Mining companies are increasingly favoring mergers and acquisitions over riskier greenfield or brownfield projects as a route to higher copper exposure. Recent examples include BHP’s US$6.4 billion bid for OZ Minerals, Rio Tinto’s consolidation of Turquoise Hill, BHP’s ultimately unsuccessful attempt to acquire Anglo American, and now the proposed merger between Anglo and Teck.

Such link-ups are framed as building stronger, more sustainable businesses with greater cash-flow potential to fund pipelines of future projects. However, according to Wood Mackenzie they also reflect a broader investor preference for short-term returns and operational synergies rather than capital-intensive investment in large projects aimed at delivering long-term growth.

Developing large copper projects requires billions of dollars in upfront capital. Western miners rely on private lenders, which are imposing increasingly demanding conditions. Financing terms

include stress tests at copper prices 20 percent to 30 percent below forecasts, high equity contributions for greenfield projects (particularly for smaller firms) and stringent ESG compliance. These constraints raise costs but, crucially, discourage investment in politically volatile jurisdictions that hold some of the richest undeveloped deposits, such as the DRC.

Beyond structural financing and geopolitical challenges, physical supply disruptions are an escalating concern. The industry’s move towards underground mining over the next two decades underscores the significant technical and cost hurdles involved. “Codelco’s Chuquicamata is one example where an extraction ramp-up has been pushed back a full decade to 2040 due to engineering setbacks, geological challenges and pandemic-related maintenance delays,” said Wood Mackenzie.

Safety risks add another layer of complexity. Recent incidents at Grasberg (in Indonesia), Kamoa-Kakula (in the DRC) and El Teniente (in Chile) highlight the dangers of deeper, more intricate underground operations. At the same time, some producers are experimenting with sulphide leaching (a technology with a limited commercial track record) as an extraction method, raising questions about long-term reliability and output stability.

Compounding operational challenges are political pressures, from expropriation threats to rising resource nationalism, further clouding the investment and supply outlook.

Climate change adds yet another dimension. Increasingly volatile weather patterns driven by the El Niño and La Niña weather phenomena, which often impact copper, have already caused periodic flooding and rainfall-related disruptions at major copper assets, a trend that is likely to intensify.

“By our calculations, the aforementioned risks suggest that the industry may need to raise its baseline assumption for annual mine supply disruptions from 5% to 6%, effectively removing 250 to 300 kt from the market each year,” said Wood Mackenzie. “That shift would heighten volatility, deepen supply shortfalls and push up copper prices during periods of strong demand.”

Copper prices, though elevated by historical standards, arguably remain too low to incentivize the scale of investment required, at least from a Western capital markets perspective. Project incentive prices might need to exceed US$11,000/t (US$5/lb), ten percent above current levels, to accelerate mine development, taking into account environmental, technical or permitting challenges, and depending on the strength (or weakness) of the dollar. “Without sustained higher prices or a change in the funding model, the growth needed over the next 10 to 15 years will remain out of reach,” concluded the report.