Falling copper grades are challenging Peru's miners to maintain output amid a looming big shortfall in the next decade due to anticipated demand for the metal for electric cars, renewable energy and data centers.
Peru's copper output is expected to remain stable in 2025 at almost the same level for the third consecutive year, according to the largest association of mining companies and analysts in the sector, as declining ore grades and a lack of new projects are limiting production.
The South American country is the world's third-largest producer of the metal, just behind the Democratic Republic of Congo, which took second place from Peru last year.
But declining copper grades after decades of mining at high-grade deposits are challenging Peru's miners to maintain output amid a huge shortfall in the next decade due to anticipated demand for the metal for electric cars, renewable energy and data centers.
Of Peru's 10 largest copper mines, seven reported lower output between January and October, the last month for which official data is available, compared with last year. The sector is expected to close the year with around 2.8 million tonnes, almost unchanged from last year.
Peru's main mining association, SNMPE, expects supplies to remain flat next year as miners grapple with how to extract more copper from lower-grade resources.
"Peruvian copper production in 2025 is expected to be similar to what was expected this year," Victor Gobitz, head of SNMPE and president of Antamina, controlled by Glencore and BHP, said in a recent telephone conversation with Reuters .
The vice president of the Peruvian Institute of Mining Engineers, Juan Carlos Ortiz, also agreed with this estimate.
"Copper production (2025) will be similar to that of 2024, because there are no new copper projects coming online next year. Only the same mines that have been operating this year," said Ortiz, who is also vice president of operations at Peru's Minas Buenaventura.
Peru's Ministry of Energy and Mines has not issued an estimate for 2025 and did not respond to requests for comment.
A dramatic change is unlikely in the near term, with no major new mines in the works. Peru's last new mine was Anglo American's Quellaveco, which came online in 2022 after a US$5.5 billion investment, and now accounts for just over 10% of national production.
At best, Peru would get a boost from two smaller projects: Southern Copper’s Tia Maria, with production expected by 2027, and Teck Resources and Mitsubishi’s Zafranal, expected no later than 2029. Together, the projects would add 150,000 tonnes of copper annually to the South American country’s output.
GREATER EFFORT
Meanwhile, mining companies are working to increase their processing capacity, with more labor and more investment in their processing plants, since lower grades of copper ore require more work to refine.
Energy consumption at the country's largest mines through October rose 2.3% year-on-year, according to private power sector body COES, reflecting the need to work harder to stay afloat.
The number of workers employed in the mining sector in Peru also reached a new historical record in October, with 247,520 workers, the sixth consecutive monthly increase.
"The main mines are entering a phase of declining productivity," said Diego Diaz, a partner and mining analyst at the consulting firm Macroconsult. "And they need to process more ore to maintain their copper production."
Most of the $3.8 billion invested in the sector this year through October (up 2% after investment fell 4% in the same period a year earlier) went into processing plants and equipment.
"What is important now is to continue working so that the projects in the pipeline continue to mature," said Gobitz, referring to projects such as Tía María, Zafranal and expansions or extensions of the useful life of existing mines.
"A project like Quellaveco is not visible," he stressed.
Peru's largest mine, Cerro Verde, controlled by Freeport McMoRan and accounting for almost a fifth of national production, has seen its output fall 5.4% year-on-year between January and October.
The company had previously forecast lower ore grades would impact 2024 sales volumes.
“Annual production will vary based on ore grades,” Freeport-McMoRan spokeswoman Linda Hayes said by email, without detailing year-end volume. “Cerro Verde’s operating rates in 2024 have been strong, supported by a motivated and dedicated workforce,” she said.
Freeport-McMoRan's Hayes said that to attract investment and boost production, Peru should "improve regulatory frameworks." In addition, "promoting responsible practices and encouraging mining exploration could create a more attractive environment for sustainable growth in the sector," he said.
Despite Peru's difficulties, it may have a chance to regain second place in the world from the Congo. At the end of August, Congo's production fell by almost 6% due to power supply problems. Peru, which fell by less than 1% in that period compared to 2023, was slightly ahead.
