Productive capacities and exports of critical minerals: the case of copper

The rising demand for critical raw materials presents an opportunity for mineral- and metal- exporting countries to increase revenues from trade and address the needs of socio-economic development. Our study investigates the role of productive capacities of exporting countries in increasing the reliability and diversity of global supply chains of critical minerals. Using 2000–2022 country-level panel data, we analyze the impact of productive capacities on exports of copper at four stages of its global supply chain. First, we find signs of a bilateral oligopoly where large exporters face China whose share reaches up to 60% of global copper imports. When we control for this structure of the international market and individual countries’ market conditions, we find low price elasticity of copper exports. In contrast, we find high responsiveness of exports to improvements in productive capacities. Specifically, ICT and energy access are important for exporting copper ores and concentrates. For semi-finished products, private sector development is essential for international competitiveness. In the case of refined copper and copper waste and scrap, institutional quality is beneficial for exports. In addition, we find that waste and scrap exports are positively influenced by the structural change, while exhibiting low requirements in energy and human capital. An important finding of our study is that exports in the upstream segment of the copper supply chain benefit from reduced institutional quality. This implies that strong demand for critical minerals may slow down institutional development in countries specializing in mining and exports of unrefined minerals.