Daily Update July 18, 2022

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

Without Addition Copper Supply, The Energy Transition Could Change Course

Copper is the essential metal of the energy transition—but the world’s limited supply could hold back much-needed electrification, unless copper mining and refining capacity expands globally. 

Global demand for copper is likely to double by 2035 due to  increased electrification and transition to clean energy generation, and will continue to grow in the subsequent years, according to a recent S&P Global study. This increased demand for copper is due to the move to electric vehicles and renewable electricity and the need for increased electricity infrastructure worldwide. But an impending supply shortage risks derailing these short- and long-term energy transition efforts in the face of the soon-to-boom demand. 

“Unprecedented quantities of copper will be demanded over the next 25 years. Understanding this unprecedented demand is essential to meeting the challenge ahead. A cascade of reports from international organizations and national governments have raised the alarm about the ability to meet the vast growth in the demand for minerals required by the race to net zero,” S&P Global said in the report. “The geopolitical risks and uncertainties about the stability of mineral supplies have been underlined by Russia’s invasion of Ukraine in 2022 and the resulting disruption of global mineral and commodity markets.”

Short- and long-term concerns over the supply of copper and underinvestment in copper mines and processing have driven up prices of the commodity. 

Higher prices have encouraged mining companies to increase their exploration budgets—supporting global copper initial resource exploration budgets to increase to $1.17 billion year-over-year in 2021, marking just 3% lower than the pre-pandemic level seen in 2019, according to S&P Global Market Intelligence. At the same time, global initial resource announcements for copper increased 38% year-over-year in 2021, at a seven-year high, according to S&P Global Market Intelligence. 

But markets in the last few months have actually seen prices for copper plummet by nearly 20%, due to recession and demand concerns, according to S&P Global Market Intelligence. These lower prices caused global copper production for the January-April period to fall 0.7% year on year. Steadily increasing demand and lower production indicates that copper is now in deficit, although high copper stocks seem to be keeping prices low, according to the World Bureau of Metals Statistics. 

Market participants have expressed worries that central bank efforts to contain inflation by raising interest rates will reduce copper consumption, specifically in the EU and U.S.’s construction and home appliances sectors. Other market participants believe supply constrains will increase copper recycling, according to S&P Global Commodity Insights. 

While major economies have called attention to the risk of copper supply deficits, more energy security efforts are needed to prevent a shortage. China now leads the U.S. in annual copper mine production and ownership of global mining, smelting, and refining assets—and neither the EU nor the U.S. have classified copper as a critical metal despite its central role in the clean energy transition, according to the S&P Global research. 

Today is Monday, July 18, 2022, and here is today’s essential intelligence.

Written by Nathan Hunt.

Economy

Listen: The Essential Podcast, Episode 65: Cogs & Monsters – An Interview With Diane Coyle

Diane Coyle of Cambridge University joins the Essential Podcast to discuss the critique she offers of the economics profession, as a professional economist. She and host Nathan Hunt cover misperceptions of economics in popular culture, false objectivity, reflexivity, and the challenge of AI. The Essential Podcast from S&P Global is dedicated to sharing essential intelligence with those working in and affected by financial markets.

—Listen and subscribe to The Essential Podcast from S&P Global

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Capital Markets

40% Of U.S. REITs Up Dividend In H1; American Tower To Sell Data Center Unit Stake

A total of 68 or 40.2% of all U.S. publicly traded equity real estate investment trusts hiked their dividends in the first six months of 2022, according to data from S&P Global Market Intelligence. Seven REITs declared higher payouts in June, with BRT Apartments Corp. announcing the largest dividend increase of the month.

—Read the article from S&P Global Market Intelligence

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Global Trade

Biden Presses Saudi Leaders To Act Through OPEC+ To Increase Oil Supply In Coming Weeks

The U.S. does not expect to secure any oil supply commitments during President Joe Biden's visit to Saudi Arabia, but he will press the kingdom to act through OPEC+ in the coming weeks, National Security Advisor Jake Sullivan said July 15. All eyes in the market will now shift to the next OPEC+ meeting, scheduled for Aug. 3, when ministers will formally set September production levels.

—Read the article from S&P Global Commodity Insights

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ESG

Listen: The Man Behind Many Of Those ESG Acronyms

Curtis Ravenel is Senior Advisor for the Glasgow Financial Alliance for Net Zero, or GFANZ, and Member of the Secretariat for the FSB Task Force on Climate-related Financial Disclosures, or TCFD. In an interview for this episode of the ESG Insider podcast following the conference, Curtis discusses the convergence happening among the alphabet soup of sustainability standard setters; the net zero transition; and the path forward during a time of tension in the ESG world.

—Listen and subscribe to ESG Insider, a podcast from S&P Global Sustainable1

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Energy & Commodities

China Data: H1 Crude Runs Slip 6% As Lockdown Erodes GDP Growth, Fuel Demand

China saw its crude throughput decline 6% year on year in the first half of the year when widespread lockdowns to battle a new wave of COVID-19 took a toll on oil demand, industrial activity, and the economy, pulling down GDP growth to as low as 2.5% in the same period, data from the National Bureau of Statistics showed July 15.

—Read the article from S&P Global Commodity Insights

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Technology & Media

Big Tech Competition Bills Still Stalled In Senate As August Approaches

A bipartisan coalition of lawmakers is pushing Congressional leaders to vote on two bills meant to spur competition in the tech space, but analysts said the bills would have little impact on Big Tech companies and will prove difficult to enforce. The American Innovation and Choice Online Act would prevent platforms from giving preferential treatment to their own products and offerings over third-party competitors.

—Read the article from S&P Global Market Intelligence

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