Copper has surged past $11,000 per ton for the first time since May 2024. The red metal is up around 21% year-to-date in a rally driven by more than just long-term demand. It is a combination of regulatory pressure, political instability, and a narrow supply base.
The world's biggest producers are stumbling, and environmental disputes freeze some of the best mines and projects. ESG regulations are locking up millions of tons of untapped supply. Unlike gold's de-dollarization breakout, copper gains are rooted in structural imbalance.
According to a new study by GEM Mining Consulting, as reported by Mining.com, about 6.4 million tons of copper capacity, roughly a quarter of global output, is currently stalled or suspended due to ESG roadblocks. These aren't geological issues; they're political and social ones.
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"These bottlenecks could be resolved through stronger governance, deeper community engagement, and more sustainable practices," said Patricio Faúndez, GEM's head of economics.
Among as many as 33 blocked projects, three stand out. La Granja in Peru, Resolution Copper in the U.S., and El Pachón in Argentina.
La Granja, owned by Rio Tinto (NYSE:RIO) and First Quantum (OTC:FQVLF), has faced local opposition for nearly two decades. In Arizona, Resolution Copper, one of the largest undeveloped copper deposits in the world, remains on hold over Indigenous and environmental concerns tied to sacred Oak Flat land. Meanwhile, Glencore's (OTC:GLNCY) El Pachón is entangled in Argentina's glacier protection laws.
Then there's Cobre Panamá, a mine that once accounted for 5% of Panama's GDP. It was forced to shut down last year after Panama's Supreme Court voided its operating contract. First Quantum, its operator, estimates that the closure costs the country up to $1.7 billion in lost economic activity. In Alaska, the massive Pebble Project remains indefinitely delayed despite being one of the richest undeveloped resources in the Western Hemisphere.
Beyond ESG-driven supply constraints, operational risks on the relatively narrow resource base have plagued the sector. Production setbacks at Codelco in Chile, Freeport-McMoRan's (NYSE:FCX) Grasberg mine in Indonesia, and Teck Resources' (NYSE:TECK) Quebrada Blanca project have shown the fragility of the supply chain. Grasberg's recent mudslide wiped more than 15% off Freeport's share price in a single day.
The Double-Edge Of Political Influence
Politics could add another layer of volatility. Midterm elections in Argentina have put mining investments on pause just as McEwen Copper evaluates its Los Azules project.
With 10.2 billion pounds of proven and probable reserves and a 19.8% IRR, Los Azules is a world-class project in the making. With a projected production averaging 204,800 tons in the first five years, the mine could be a low-carbon, long-life operation. Yet, investors are holding their breath until the country's political direction stabilizes.
As copper-rich nations stumble over red tape and risk, Zambia could emerge as an unlikely winner. The African producer is on track for a record one million tons output this year. By 2030, the goal is to reach 3 million tons annually.
"The level of investment that's coming in right now, I don't think that can be matched in the history of Zambia," First Quantum CEO Tristan Pascall said, according to Bloomberg.
Although not without hurdles, Zambia could fill the supply vacuum left by the risks elsewhere. So far, it has around $10 billion in new investments from Barrick (NYSE:B), First Quantum, and Sinomine Resource Group.
Price Watch: Global X Copper Miners ETF (NYSE:COPX) is up 67.62% year-to-date.
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Photo by Ziadi Lotfi via Shutterstock
