Vedanta Copper, a subsidiary of India’s Vedanta Limited (NSE:VEDL), has announced plans to invest $2 billion in copper-processing facilities in Saudi Arabia. This development is part of Saudi Arabia’s broader effort to position itself as a global leader in metals and mining. The announcement was made during a major economic event where Saudi Arabia unveiled nine investment deals totaling over $9.32 billion (35 billion riyals).

The $2 billion investment will fund the construction of advanced copper smelting and refining facilities in Saudi Arabia. The new plants will have the capacity to process 400,000 tonnes of copper annually. Vedanta also plans to establish a facility to produce up to 300,000 tonnes of copper rods per year, a critical material for electric cable manufacturing.

This move comes at a time when copper demand is growing thanks to its use in renewable energy systems and electrification. According to Vedanta, global copper demand is expected to increase by 40% by 2040. The company highlighted copper’s central role in decarbonization efforts, particularly in achieving climate targets set by the Paris Agreement. These targets require substantial investment in renewable infrastructure, with annual funding needs projected at $1 trillion between 2025 and 2030.

Strategic Importance for Saudi Arabia

The Vedanta deal aligns closely with Saudi Arabia’s Vision 2030, a sweeping economic diversification initiative designed to reduce the kingdom’s reliance on oil and unlock $2.5 trillion in untapped mineral resources. The initiative aims to increase the mining sector’s contribution to the national GDP from $17 billion to $64 billion by the end of the decade.

Currently, Saudi Arabia imports most of its copper to meet domestic demand, estimated at 365,000 tonnes annually. That figure is expected to more than double by 2035. Vedanta’s investment is projected to contribute nearly $19 billion to Saudi Arabia’s GDP, reduce dependency on imports, and stimulate the growth of downstream industries. The projects are also expected to create thousands of jobs, further supporting Vision 2030’s objectives.

Regional and International Partnerships

The Vedanta deal was one of several major investments announced in Saudi Arabia this week. Other agreements include partnerships with international companies such as China’s Zijin Group. These deals underscore Riyadh’s broader strategy to attract foreign direct investment to strengthen its mining and metals sectors.

Saudi Arabia has also established Manara Minerals, a joint venture between the Public Investment Fund (PIF) and the Saudi mining company Ma’aden. This fund is designed to acquire mineral assets abroad, aligning with the kingdom’s focus on metals essential for renewable energy and infrastructure.

In 2023, Manara Minerals made its first major international move by acquiring a 10% stake in Vale’s copper and nickel spin-off, Vale Base Metals, valued at $26 billion. Saudi Arabia is also pursuing a stake in Pakistan’s Reko Diq copper and gold mine, a $7 billion project partially owned by Barrick Gold and the governments of Pakistan and Balochistan. Pakistan recently formed a high-level committee to finalize terms for Saudi Arabia’s potential acquisition of a 15% stake in Reko Diq.

Copper Supply Challenges and Global Impact

The global copper market faces significant supply constraints as demand continues to rise. The metal is vital for renewable energy systems, electric vehicles, and infrastructure projects tied to the global energy transition. Vedanta and other industry leaders have warned of a looming copper undersupply.

BHP, the world’s largest mining company, recently forecasted a global copper deficit of 10 million tonnes within the next decade. In response, the company has committed at least $14 billion to expand operations at the Escondida mine in Chile, the largest copper mine globally, as well as other projects in the region.