Geostrategic Media Political Commentary, Analysis, Security, Defense
Copper mining has always been a highly competitive industry, and the geopolitical imperatives surrounding its production are thickening.
Copper is one of the world’s most useful industrial metals. If you tear open any mobile phone, laptop, solar panel, wind turbine, or electric vehicle (EV), you will find it. Without copper, there can be no green revolution. While demand for the reddish metal is set to rise, potential disruptions could also put upward pressure on prices, favoring the world’s leading producers, Chile and Peru. However, China is looking to play a more significant role in the production and refining of copper, which will change the economic landscape for the two South American countries and the United States. The geopolitical implications are also significant as China gains greater weight in critical materials, casting a long shadow over American plans to transition from fossil fuels to alternative energy.
China’s motivation to broaden and deepen its footprint in copper markets is motivated by several factors. The Asian country’s economic development, including the latest emphasis on green technology, requires much more copper than it produces domestically. In 2022, it is estimated that China accounted for 58 percent of the world’s copper imports. Anyone seeking where ongoing demand comes from should only look at China’s surge in EV production, as it accounts for 59 percent of global electric vehicle (EV) sales. According to Statista, in 2022, China produced around 5.47 million battery EVs, an increase of 85.8 percent compared to 2020. With this in mind, China launched a multi-agency government work plan in 2023 to target the promotion and steady expansion of the non-ferrous metal industry, which includes copper.
China is also concerned about the increasing vulnerability of its supply chains, making its production capabilities essential. Issues in the South China Sea, Taiwan, and the East China Sea could complicate access to source countries, which will also see a more significant push from the West to secure its own supply chains. Consequently, China wants to develop its copper resources more fully to de-risk its vulnerability to extended supply chains as much as possible. That is happening.
In February 2024, China approved a $2.4 billion plan to expand the Julong copper mine in the Qinhai-Tibet Plateau. Operated by the Zijin Mining Group, the project would give the Asian country the world’s largest copper mine. It is expected to start operations by year-end 2025 and will help secure China’s position as the world’s leader in copper refining.
China is also expected to increase its copper smelting capacity by 45 percent by 2027, accounting for 61 percent of expected new plants worldwide. The implication of many new Chinese smelters will likely inject greater price volatility into copper markets. Despite greater output from Chinese domestic mines, demand from the new smelters will most likely still outstrip local production. Still faced with a shortfall at home, Chinese refiners may be inclined to pay higher prices in international markets, which could drive prices higher and pressure the price margins of other countries’ older smelters.
China’s push to dominate the copper market could follow a similar path to that of steel. A 2023 Bloomberg report observed: “The expansion of smelting capacity echoes the history of China’s other metals industries. Until 2006, the country was a net importer of steel, for example. But a wave of new capacity eventually led to a flood of exports—hurting international steelmakers and fueling global trade tensions in the pre-Trump era.” As of 2022, China’s steel production accounted for 54 percent of the total global total, dwarfing all other countries.
Latin American figures are prominent in China’s geoeconomic plans. Even with efforts to increase the production of mined domestic copper ore and refined copper, China still needs access to foreign producers, especially Chile and Peru, the world’s top two producers of copper (accounting for 40 percent of global production).
It can be argued that the heavy reliance on mining in Chile and Peru and China’s hunger for many of the metals offered have made the South American economies dependent on the Asian economy. For Chile, the mining sector is dominant, contributing close to 14 percent of the country’s GDP, while mining exports account for nearly 58 percent of total exports. Mining also plays a significant role in Peru’s economy, producing not just copper but large amounts of gold, silver, iron ore, and other ores. The country holds 9.1 percent of the world’s proven copper reserves, behind only Chile and just ahead of Australia.China takes 74.1 percent of Chilean copper exports and 72 percent of its lithium exports. Likewise, over 70 percent of Peru’s copper is exported to China. China is also both countries’ major trade partner.
China has worked hard to secure its position in the Latin American mining sector through economic statecraft that encompasses bilateral relations stressing win-win trade and investment, its massive infrastructure project, the Bridge and Road Initiative (BRI), and the active nature of Chinese companies. Soft loans from state development banks have facilitated China’s economic approach, free trade agreements (with Chile since 2006 and Peru since 2010,) a willingness to assume the costs of major infrastructure projects, and a sustained effort to cultivate local elites. In Peru, Chinese mining companies have invested more than $16 billion in mining projects since 2009, and a pipeline of Chinese-led projects is waiting to be launched that could exceed $10 billion. Equally crucial in Peru is China’s construction of a $3.6 billion mega-port in the former fishing village of Chancay, designed to “turbocharge South America’s trade ties with China.” The port is majority-owned by China’s state-owned COSCO Shipping and will be used to export copper and other minerals to Asia.
While Latin America is a metals treasure trove for Chinese mining companies, pressure is growing to expand Chinese domestic production or find other producers due to rising political risk in the region. Several factors have led to this situation: Panama’s abrupt closure of its major copper mine in 2024, political turmoil in Peru (since 2018, the country has had seven different presidents), growing public concerns over the damaging impact of mining on the environment, and a surge in Indigenous people asserting their land rights (as in Argentina, Chile, Ecuador, and Suriname). Panama’s mine closure took around 1 percent of the world’s copper production out of the global market, while some major miners, like Anglo American, are reducing production to reduce costs.Anglo-America’s primary copper mining operations are in Chile and Peru.
Panama highlighted that much of the population did not want a large mining operation in their country. Environmental concerns loomed large. There is sentiment in Latin America that while dealing with climate change is of considerable importance, people do not want the dirty work of mining for critical materials undertaken in their home countries, primarily if it benefits the Global North, where such enterprises are generally shunned due to environmental concerns. This also impacts China as its mining companies do not have the greatest records in using practices that cause pollution. This mix of factors was most likely considered in the decision to increase Chinese domestic copper production.
Another factor complicating the Latin American mining scene is economic nationalism. Many countries want to be more involved in the value-added part of the business rather than being limited to simple extraction. This has been a significant factor in lithium mining in Bolivia and Chile. In Bolivia, the demand for state control over mining, refining, and EV production stultified the sector’s development until very recently, when the government finally signed off on projects with Chinese and Russian companies.
Chile is not immune from concerns over economic nationalism, though negative sentiment is probably overblown. Chile declared its lithium sector strategically essential and is moving to establish a state-owned company, along the lines of its copper company Codelco, to manage those assets and work with foreign companies. Chile has a considerable pipeline of new copper mining projects. Still, that flow of investment has slowed due to uncertainty over how the center-left Boric government will proceed vis-à-vis the mining sector.
While China has worked hard to achieve positive relations with Chile and Peru, it is hedging its bets by looking elsewhere. Attracting foreign investment is a competitive game, and if operational conditions are uncertain, it is prudent to consider other options. Close to the two Andean countries, Argentina has enjoyed a mining boom over the past several years, primarily driven by lithium. In contrast to the more significant state role in Bolivia and Chile, Argentina has offered a more laissez-faire environment for foreign investments in mining. In October 2023, automaker Stellantis and Rio Tinto announced an increase in their investments in a sizable copper deposit. Other countries outside of South America are willing to sell to Chinese companies. African nations loom large, with China having a near-stranglehold on battery metals and Russia having gained considerable influence over other materials.
On the copper front, Chinese companies are already working in the Democratic Republic of Congo and Zambia, and other countries, including Afghanistan, are open to investment from China.
The United States is deeply concerned about competition with China over global supply chains, including for copper. Like its Asian rival, it needs many of the same critical materials from other countries. In February 2024, Energy Secretary Jennifer Granholm appeared on CNBC and indicated that the Biden administration is “very concerned” about China’s hold on the mineral supply chain and that the U.S. does not want to be “over-reliant on countries whose values we may not share.” Washington should be concerned about China’s heavy engagement in Chile, Peru, and other Latin American countries for critical materials such as copper, lithium, nickel, and zinc. U.S. companies are active in Latin America but lack the same levels of state support that Chinese companies receive. The 2022 Inflation Reduction Act, which pumps $369 billion into making the United States competitive in green technology, is a good start. However, China’s push to advance green tech has been in motion for a long time.
