BHP Mega Bid and $10,000 Copper Expose Mining’s Biggest Problem

-- Copper’s surge to $10,000 a ton just days after the bombshell news that BHP Group is trying to buy Anglo American Plc is highlighting a core disconnect at the heart of the industry: miners just aren’t building enough mines.The biggest producers all want to increase copper output to take advantage of rising demand in electric vehicles, grid infrastructure and data centers.

The question of supply has been the driving force for copper’s 16% rally this year. Unlike the last time that prices hit $10,000, copper demand is relatively tepid for now and the physical market is well supplied.Instead, the surge is being fueled by investors betting on looming shortages and the expectation that mining executives and their shareholders aren’t ready to finance and build enough new projects — and would rather buy out their rivals instead.

The world was more reliant on older mines with lower ore grades than in the past, she said. “On supply, there’s a true challenge.” Miners would need $12,000 copper to justify spending on new mines, according to Olivia Markham, who co-manages the BlackRock World Mining Fund. And even then their investors may be reluctant to fund them.

Massive Chinese investment in overseas mining assets has already upended the markets for key battery metals such as nickel, lithium and cobalt, pushing them all into surpluses. Copper is also a key component in EV batteries and motors, but the global market is so large that China won’t be able to solve the industry’s supply challenge on its own.

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