Poland Oil Discovery: Prices Surge & Mining Output

The text was created as part of the WP Opinie project. We present the diverse views of commentators and public opinion leaders on key social and political issues.

Copper is often referred to as having a “PhD in economics.” The copper-to-gold price ratio is considered an important indicator of the state of the global economy. When economic conditions are good, the price of copper increases, and when anxiety increases, investors turn to gold.

The beginning of the year was a period of rising gold prices, related to uncertainty following the changes in the White House and fears that the introduction of tariffs by President Trump’s administration will contribute to the slowdown in global economic growth. This policy was intended to hit China in particular, which consumes nearly half of the world’s copper production.

In China alone, about 30 percent copper is traditionally used in the construction industry. Previous However, this country’s economic model, which involves mitigating the effects of crises by building new, often uninhabited cities, is slowly becoming a thing of the past.

For some time now, copper producers’ hopes have been linked to the electric vehicle (EV) market. The amount of copper used to produce a passenger car increases from about 20 kg in the case of combustion vehicles to up to 80 kg in the case of electric vehicles, not to mention the entire infrastructure needed for charging.

Looking at the example of the Chinese market, where EVs already account for more than half of new car sales, and multiplying the increased demand by nearly 100 million cars produced annually in the world, the potential increase in demand for copper could reach up to 20%. world mining. This is a significant number, although it should be remembered that in many markets EV sales still do not exceed a dozen or so percent. Additionally, copper in electric cars has a relatively short lifespan, which means that after a few years the recycled metal can be put back on the market.

Current copper prices, oscillating around PLN 7,000-8,000. hole. per tonne, appeared for the first time almost 20 years ago. This was the result of the Chinese economic boom and the Beijing Olympics, which initiated the “copper boom”. It is worth recalling that this level appeared shortly after the period when the copper price reached a maximum of PLN 2,000. hole. per tonne, and was therefore a much bigger shock than the current increases.

After that period, the price of the metal moved mainly in a horizontal trend, with significant declines during periods of economic slowdowns and pandemics. The price remaining relatively constant for many years, combined with high inflation (especially wage inflation), did not ensure attractive rates of return on new mining projects. This, in turn, did not encourage companies to make new investments.

So what happened that the copper price was torn from its long-term lethargy and moved “north”, reaching levels close to 12,000? hole. per ton?

The key moment was September 25 this year, when the American company Freeport-McMoRan announced that as a result of a rockslide, the second largest mine in the world – Grasberg in Indonesia – would be forced to reduce production next year by about 35%. This single event impacted global supply by approximately 1%. One percent doesn’t seem like much, but considering that next year was supposed to be the last year without a deficit, and a moment later subsequent producers announced less than optimistic production forecasts for 2026, the market immediately reacted.

The question arises as to what influences the deficit forecasts so much, since it is not only the Chinese construction industry or the growing electric car market. And here we come to the second, even hotter investment topic: artificial intelligence.

The heads of the largest companies involved in the construction of data centers often point to the biggest bottleneck in the development of AI, which is access to electricity. It is no coincidence that the shares of gas turbine manufacturers (constructing a gas power plant is the fastest way to obtain a stable energy source) – such as the German Siemens Energy or the American GE Vernova – have recently increased by hundreds of percent.

Each new power plant uses tons of copper, not to mention the cables and transformers necessary to transmit this energy from the point of production to the point of consumption. In many of these applications, copper is difficult to replace. Aluminum can be a substitute, but it never offers such favorable parameters.

Combining these prospects with forecasts of decreasing production and the small scale of investments in recent years, We have achieved an increase in metal prices of approximately 35 percent so far. since the beginning of the year.

Why didn’t copper producers notice this phenomenon earlier and invest heavily in new mines?

AI on the current scale is a relatively new phenomenon that has only been raising investors’ hopes for 2-3 years. This is a short period for the decision-making and investment process in mining.

Investments in mines are expensive. It is estimated that the copper price at which it is profitable to decide on a new mining project must reach PLN 12,000. hole. per tonwhile recently it was closer to the limit of 8,000. hole.

Many mining projects have encountered delays, overrun budgets, or been blocked. The policies of countries that, as a result of the actions of local communities, limited investments that were burdensome to the environment or imposed new taxes were also important.

Many analysts are sharply divided on the metal’s prospects. Some of the largest investment banks are extremely optimistic, predicting deficits reaching several percent of production. Others claim that there will be no deficits because the Chinese, still of great importance to the market, will reduce consumption when the price reaches unacceptable levels. There are also voices about the AI ​​bubble bursting, which would certainly affect the price of the metal, and about substitution possibilities in the form of aluminum, the price of which has also started to increase.

In my opinion – and I have been observing this market over the years – the changes that have been taking place recently are of a fundamental nature and are pushing prices to a new, lasting level, which I estimate at PLN 12,000-15,000. hole. per ton. Similar changes took place at the beginning of the century and then permanently moved copper prices from PLN 1.5-2 thousand. hole. for 7-8 thousand hole. per ton.

It’s not just about AI. Global changes will increase the demand for metal. It is no coincidence that China is the largest consumer of copper, not only because of the construction industry, but largely because of the historical policy of transferring production to the Middle Kingdom from other parts of the world.

Now, when – as I believe – the industry will gradually return to other parts of the world, much of the infrastructure will have to be built from scratch, and this is impossible without copper.

Copper is increasingly being called the “new oil”. From this point of view, Poland is in a good place. KGHM, only in Poland, extracts nearly 400,000 tons of copper, which is less than 2%. world production. It may not seem like much, but it is more or less similar to Norway’s share in oil production.

Dawid Czopek, manager of Polaris FIZ