Is copper a critical mineral, essential to US economic and national security, and vulnerable to supply chain disruption? According to the US Geological Survey (USGS) and thus the US government, the answer is no. But copper shortages in the face of rising demand, coupled with rising insecurity and instability in copper-producing Peru, should give the Biden administration reason to consider making an exception and adding copper to the US list of critical minerals.
Critical mineral designation by the USGS would encourage US private investment in domestic copper mining and production infrastructure, and would underpin administration attempts to make good on its goal of a “Made in America” supply chain at a time when mineral resources are increasingly viewed as a source of significant geopolitical risk. The designation would spur federal assessment of supply chains and options for recycling and substitution, focus attention on developing strategies for securing supplies from allies and trusted trading partners, task the USGS with collecting and providing necessary geological data to inform private sector exploration efforts, and provide recommendations for facilitating the necessary permits to bring domestic mining capacity on line. The designation does not come with large fiscal outlays per se, but it would create a more robust domestic architecture for promoting those investments.
Peru is the world’s second largest producer of copper, behind only neighboring Chile. Since December 2022, Peru has been engulfed by an escalating campaign of anti-government protests that have become violent. The protests started in the wake of President Pedro Castillo’s arrest and removal from office, and support for him is particularly strong in southern Peru, including in the country’s second largest copper-producing region. Bloomberg estimates 30 percent of the country’s production—roughly equivalent to 3 percent of the global total—is imperiled because of political turmoil.
Copper is a vital ingredient in renewable energy technologies—solar panels, batteries, wind turbines, etc.—and therefore essential for combating climate change. Copper also has a host of wider applications in industry and national defense. The International Energy Agency forecasts global copper demand will more than double by 2040 solely due to rising demand for clean energy. As defined by the USGS, mineral criticality consists of three elements: 1) concentration of global production (weighted by that country’s ability and willingness to supply), 2) dependence on imports, and 3) economic vulnerability, or whether US industry and national defense could adapt quickly to a radical change in supply or price environment. Copper has been a key industrial metal since the beginning of the 20th century, so unsurprisingly its potential for economic disruption was assessed for the period 2019–21 as high. However, its disruption potential and trade exposure were assessed as low (though rising).
Relative to listed critical minerals, copper is widely mined and processed. Though China is the world’s single largest refiner, accounting for 38 percent of global output in 2021, significant refining capacity exists in the United States, Germany, and Japan (among others). And over half of global mine output was produced in countries with which the United States has a free trade agreement (figure 1). Because copper has been a lynchpin of industrial economies for well over a century, global mining and refining capacity for copper is more diversified and surpasses that of more “boutique” critical minerals that were on the fringes of national security discussions prior to the recent push toward decarbonization.
However, the security of diffuse global supply chains and production in US-friendly economies is still vulnerable to disruptions in producer countries. The ability and willingness of copper producing countries to keep supplying copper can change rapidly. And trends in Peru may affect both. Regarding ability, production at key Peruvian mines has been either halted (Glencore’s Antapaccay mine) or slowed (Freeport McMoRan’s Cerro Verde). These developments may be short lived. The longer-term outlook regarding willingness to keep the mines open is murkier, however. Protesters in Peru have assailed the country’s constitution as overly friendly to private investors, which raises the prospect that a new constitution—or amendments to the current one—would favor national ownership and control and discourage outside investment.
A constitution with a more nationalist approach to natural resources might not help address protesters' broader grievances with political and economic corruption, but it could lead to more deferred maintenance and deteriorating supply stability, as it has in Venezuela’s nationally owned petroleum industry. While Latin America is viewed as less politically volatile than other mineral-rich regions—particularly sub-Saharan Africa—these political and issues could curb the region’s economic growth potential.
Designating copper as critical to national and economic security would lead to enhanced scrutiny from the USGS, which tracks minerals markets, production, and reserves. Industry advocates also believe that the designation might lead to streamlined permitting processes that would facilitate more domestic production. Securing the necessary permits for greenfield mine projects is a complicated process that requires not just federal permission but engagement with local and state governments, environmental assessments, and securing the assent of the communities and other stakeholders that will host the projects. These are good and necessary steps. But bolstering domestic mineral supply chains will require expediting these processes.
The United States and the European Union face a common problem in granting permits for the mining and production of minerals. The European Union’s own critical minerals agency has called for reforms to permitting processes in order to build long-term resilience to global supply shocks. Indeed, some harmonization of EU and US approaches in permitting reform would be wise to avoid additional European rancor in the aftermath of the US Inflation Reduction Act’s unilateral approach, which thus far has entailed minimal coordination with important trade and security partners. If the United States and the European Union are serious about building more resilient supply chains, environmentally responsible domestic production will need to be part of the solution.
The US critical minerals list is updated on a three-year cycle, with the most recent list published in 2022. But politics and market responses to these updates move fast. The US government needs to take vulnerabilities like the situation in Peru into account—and it can, even though the critical minerals list was just updated: The law that created the list and the underlying process of identifying minerals allows the Secretary of the Interior to designate additional minerals like copper to the list as necessary without further legislative approval. The events in Peru—and neighboring Chile, which recently rejected a replacement to its current constitution but still provides a roadmap to crafting a new supreme law of the land—suggest it is time for the Biden administration to do so.
This publication does not include a replication package.