.05.06
Copper is one of our most important metals with more than 20 million tonnes being consumed each year across a variety of industries, including building construction (wiring & piping,) power generation/ transmission, and electronic product manufacturing.
Roskill forecasts total copper consumption will more than double and exceed 43 million tonnes by , driven by population and GDP growth, urbanization and electricity demand.
In recent years, the global transition towards clean energy has stretched the need for the tawny-colored metal even further. More copper will be required to feed our renewable energy infrastructure, such as photovoltaic cells used for solar power and wind turbines.
The metal is also a key component in transportation, and with increasing emphasis on electrification, demand is only going to increase, as EVs use about four times as much copper as regular internal combustion engine vehicles.
In fact, copper is so critical to electric vehicle and clean energy technologies, analysts at Goldman Sachs are calling it &#;the new oil&#;.
During the first half of , copper rallied on the back of a sharp recovery in economic activity after a year of pandemic-related malaise, led by top consumer China. At the end of last April the spot price broke through the $10,000/t level, the first time that has happened in a decade, and eventually hit a new high the week after.
In H2, copper received another boost amid an energy crisis that affected several major producers and threatened global supply. A surge in metal orders from warehouses in Europe saw LME inventories plunge by as much as 89%, to their lowest in 47 years.
All these events factored into copper&#;s record-breaking year, but the run wasn&#;t over.
A combination of supply disruptions, historically low copper stockpiles and higher energy costs, propelled the base metal to a new all-time high of $4.94/lb on Friday, March 4.
5-year spot copper price. Source: KitcoDespite a number of headwinds, including the repercussions from the war in Ukraine on global growth, rising interest rates, and a slowdown in the Chinese economy, copper is showing remarkable resilience.
Below are the top 5 reasons we think copper prices will stay elevated and potentially move beyond $5 per pound.
Electrification & decarbonization
The continued move towards electric vehicles is a huge copper driver. In EVs, copper is a major component used in the electric motor, batteries, inverters, wiring and in charging stations. An average electric vehicle contains about 4X as much copper as regular vehicles. Electrification includes not only cars, but trucks, trains, delivery vans, construction equipment and two-wheeled vehicles like e-bikes and scooters.
The latest use for copper is in renewable energy, particularly in photovoltaic cells used for solar power, and wind turbines. The base metal is also a key component of the global 5G buildout. Even though 5G is wireless, its deployment involves a lot more fiber and copper cable to connect equipment.
The big question is, will there be enough copper for future electrification needs, globally? And remember, in addition to electrification, copper will still be required for all the standard uses, including copper wiring used in construction and telecommunications, copper piping, and copper needed for the core components of airplanes, trains, cars, trucks and boats.
The short answer is no, not without a massive acceleration of copper production worldwide.
According to a joint report from Ernst & Young (EY) and Eurelectric, Europe will have 130 million EVs by .
The report&#;s projections, cited by BNN Bloomberg, show Europe&#;s EV fleet growing from its current <5 million to 65 million by , then doubling over the following five years. This number of EVS will require 65 million chargers.
EVs take about 85 kg of copper per vehicle.
An EY leader notes it took 10 years to install 400,000 chargers, now we will need about 500,000 per year until , and 1 million every year between and . Where is all the copper going to come from?
Infrastructure buildouts
Copper&#;s widespread use in construction makes it a key metal for civil infrastructure renewal. Last November the United States Congress passed a $1 trillion piece of legislation aimed at addressing the country&#;s glaring &#;infrastructure deficit&#;. Repairing and improving the country&#;s roads and bridges, public buildings, ports, airports, etc. will require copious amounts of metal, including copper.
China recently announced a $2.3 trillion infrastructure program based on developing high-tech manufacturing. Local governments are being tasked with identifying and financing hundreds of new projects.
According to the USGS Mineral Commodity Summary, nearly half of the world&#;s copper makes its way into buildings, from downtown skyscrapers to suburban homes. The average single-family home today contains about 200 kilograms (439 pounds) of copper metal.
Source: USGSWith physical properties that few metals can match, copper can be used in a wide range of building applications, from heating and plumbing to roofing and electrical wiring.
Furthermore, copper is a sustainable metal for use in building construction, as it can be recycled time and time again without losing durability or conductivity, which means it has low life cycle impacts.
Production snafus
Copper&#;s current price strength is underpinned by how tight the copper market is, and is expected to be in future.
Much more copper is required for the mining industry to avoid a supply crisis that is all but guaranteed within a few years.
In March, the head of base metals supply at CRU, a leading authority on copper, said the global copper industry needs to spend more than $100 billion to build mines able to close a projected annual deficit of 4.5 million tonnes by . The next decade, the supply gap widens to 6Mt.
Other analysts think the supply crunch will come much sooner.
S&P Global Market Intelligence predicts that due to a shortage of projects, copper supply will lag demand starting as early as , with global mine production dropping from last year&#;s 21Mt to roughly 15.9Mt in .
In fact, the coming supply crisis is manifesting as we write, with some of the world&#;s largest copper miners proving unable to produce as much as they said they would. BHP, Rio Tinto, Anglo American, First Quantum Minerals and Glencore have all pared back production forecasts, blaming higher costs for their lower output figures.
Following a 14% drop in copper production in Q1, Glencore cut its guidance by 3% or 40,000 tonnes.
&#;Supply disruptions in various locations are putting production at risk,&#; Morgan Stanley analyst Amy Sergeant told Bloomberg earlier this week. &#;Risks to supply are rising in the near term, which could keep the copper market tighter in the second quarter.&#;
Inventories across London Metal Exchange warehouses of copper, lead, nickel, zinc and tin haven&#;t been this low for 20 years, with the total amount of registered metal in the LME&#;s global warehouse network falling below 1 million tonnes in March.
Source: KitcoAn even bigger draw-down is occurring within LME shadow inventories, referring to metal that is stored off-market but is under a warehousing contract allowing for exchange delivery.
The result is higher prices and increased volatility.
Lack of new mines
The Fraser Institute thinks Canada is not doing enough to make the country an attractive jurisdiction for mining investment.
Bill C-69 is an example of legislation passed by a government that has the ear of special interests. The new legislation broadens the scope of the assessment process and adds more consultation with the public and particularly indigenous groups.
Such anti-mining legislation can present a significant obstacle to companies trying to move a project forward to production, and in the worst of cases, drags the process out so many years that the economics no longer work and the mine is shelved.
This often happens in North America, where it can take up to 20 years to move a project from discovery to commercial production. A preliminary economic assessment done in year 3 is of little use if the minerals aren&#;t produced until year 20.
According to Goehring & Rozencwajg Associates, the number of new world-class copper discoveries coming online this decade &#;will decline substantially and depletion problems at existing mines will accelerate.&#;
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According to the Wall Street firm&#;s model, the industry is &#;approaching the lower limits of cut-off grades,&#; and brownfield expansions are no longer a viable solution.
&#;If this is correct, then we are rapidly approaching the point where reserves cannot be grown at all,&#; the report concluded.
It also shines a light on the importance of making new discoveries in establishing a sustainable copper supply chain.
Over the past 10 years, greenfield additions to copper reserves have slowed dramatically. S&P Global estimates that new discoveries averaged nearly 50Mt annually between and . Since then, new discoveries have fallen by 80% to only 8Mt per year.
And while S&P Global has identified 14 probable and 26 possible projects in the copper pipeline, the firm admits it&#;s unlikely that all of those will come to fruition.
Resource nationalism
Along with technical issues such as falling grades and geological constraints concerning copper porphyry deposits, there is also supply pressure from growing resource nationalism.
The industry is running out of copper at precisely the wrong time, as demand is accelerating rapidly not only for traditional uses, i.e. construction, transportation and telecommunications, but for the green economy which includes vehicle electrification and renewable energy.
Yet all the low-hanging fruit, so to speak, has been picked.
There is a need to go further afield and dig deeper to find copper at the grades needed to economically produce copper products for end users. This usually means riskier jurisdictions that are often ruled by shaky governments, with an itchy trigger finger on the resource nationalism button. Combine that with production problems and you have all the makings of a structural supply shortage, meaning higher copper prices will likely be with us for the foreseeable future.
Richard (Rick) Mills
aheadoftheherd.com
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A report from S&P Global forecasts that global demand for copper could double by , from 25 million metric tons to 50 million metric tons. By , supply from both existing and projected copper mining activities will meet just 80% of our needs. In relation to annual copper demand, Thomasnet.com®&#;s own sourcing data shows a 501% year-over-year increase in copper alloy sourcing, although the category includes brass, bronze, and engineering alloys.
Companies using Thomasnet.com to source copper alloys include general manufacturing for, inter alia, industrial machinery, aerospace and defense, and industrial component markets. Copper is important in electric motors, power transmission equipment, renewable energy tools and wind turbines, electronic devices, heat transfer systems, and many other fundamental applications. In addition, copper is used in modern conveniences such as robotics, automation, computational power, and fast energy transmission.
Then there&#;s the fact that, except for silver, copper is the very best electrical conductor with the best energy transition. Copper is such a good electrical conductor that it is sometimes referred to as the &#;metal of electrification.&#; Alternatives such as aluminum are often opted for; however, they are poor substitutes for copper as they cannot attain the same superior thermal and electrical transferability levels. But this is nothing new. So what&#;s changed in recent years?
Suppliers recognize copper&#;s importance and are stocking up in anticipation of the rising demand and a potential copper deficit. The electric vehicle boom, coupled with advancements in artificial intelligence, automation, and renewable energy, is projected to drive a substantial increase in copper demand over the next decade, according to Trafigura. This surge in demand, estimated at around 10 million metric tons, will primarily stem from sectors like electric vehicles, electricity generation, and transmission, as well as automation and manufacturing.
China&#;s aggressive investments in electric vehicles, solar panels, and infrastructure, alongside a global manufacturing resurgence, have already spurred heightened demand for copper. Combined with supply disruptions, such as mine closures and declining stocks, this has propelled copper prices to two-year highs. Analysts anticipate significant shortages in the global copper market, with India&#;s burgeoning industrialization and urbanization expected to further bolster demand in the emerging world. Recent weeks have seen broad gains in base metals.
Factors driving this surge include signs of improvement in global manufacturing activity and disruptions at major copper mines. However, geopolitical risks and uncertainty over monetary policy pose clear risks. Despite these challenges, the outlook for copper remains bullish in , driven by a tighter market and short covering. Overall, the global market for base metals is experiencing dynamic shifts influenced by a range of factors, including economic trends and copper supply chain disruptions.
Let&#;s take a deeper look into the factors that are driving the steep rise in demand for copper, and what can be done to accommodate it, as well as how it&#;s being used today.
Copper has long been used in electric wiring for domestic and industrial purposes in electronics circuitry, power generation, transmission, and electrical equipment. It&#;s fairly cheap to produce, strong, very conductive, and thermal resistant&#;factors that make it the perfect choice for electrical wiring. In the two years following the COVID-19 outbreak, and with no opportunity to fritter their money on social experiences, like traveling and dining out, many Americans turned their attention to consumer electronics, which have a relatively high copper content. During this time, people spent 18% more on manufactured goods, which goes some way to explaining the increase annual copper demand has seen in relation to copper wiring.
Great emphasis has been placed on a greener and cleaner future by the Biden administration. For example, the recently implemented Inflation Reduction Act (IRA) seeks to cut the nation&#;s carbon emissions by approximately 40% by . In the slightly longer term, plans are in place to achieve a 100% carbon-free electricity grid by and net-zero economy-wide greenhouse gas emissions by . Achieving these goals necessitates a shift away from fossil fuels as primary energy sources, which spells good news for the planet and Americans paying ever-increasing energy bills.
But renewable energy systems, while sustainable and increasingly affordable, are also far more metal-intensive. Compared with the electricity generated via natural gas or coal, solar energy requires double the amount of copper per megawatt, while offshore wind requires five times the amount. Electricity networks must also be expanded to enable the switch from fossil fuels to renewable energy, a transition that could double the amount of copper used in grid lines by . With copper in short supply, the U.S. could struggle to meet its climate goals.
The Biden administration&#;s infrastructure bill allocates significant funding to expanding the electric vehicle (EV) market. For example, there are plans to install 500,000 EV charging stations by and switch 10,000 buses to electric. Interest in EVs was already growing, thanks to their increased affordability and better battery life. In alone, sales leaped by 160%. There are now more than one million EVs on U.S. roads, a number that is expected to reach 18 million by . According to the Copper Development Association, conventional cars require 18-49 pounds of copper. Electric cars typically use 183 pounds of copper, and battery electric buses use 814 pounds. As with renewable energy sources, an insufficient supply of copper could ultimately hold up the rise of EVs.
One of the factors driving this steep rise in demand is copper&#;s applications in the healthcare industry. Copper forms an essential part of various medical devices. This is partly thanks to its high level of conductivity, but also because of its antibacterial properties. Copper coatings on medical devices serve as antibacterial surfaces, offering practitioners and patients an extra layer of protection against bacterial infections. Copper is also used in medical settings to transmit signals to diagnostic tools and small implants. Let&#;s look at the copper demand in the medical industry a little more closely.
One of the reasons copper is big in the medical industry is that it forms an essential part of various medical devices, thanks to it being non-flammable, highly conductive, and antibacterial. Its RFI/EMI shielding capabilities also prove useful in a medical environment. More on these factors below.
Image Credit: Shutterstock/Joeri MostmansIn , the U.S. Environmental Protection Agency (EPA) recognized copper as the first antimicrobial metal. Copper surfaces have been proven to reduce bacteria on high-touch surfaces in a medical environment. The EPA asserts that copper kills 99.9% of surface bacteria within a couple of hours, and, following longer incubation periods, it is unusual for any microorganisms to be recovered. When microbes, which are typically transferred via coughing, touching, sneezing, or vomiting, are transferred to a copper surface, the metal releases copper ions that prevent cell respiration, create holes in the cell membrane and destroy the DNA and RNA inside.
Research shows that using copper in medical wards and intensive care units can reduce the number of live bacteria by 90% and drastically reduce infection rates. This is very beneficial in a medical setting. Hospitals and medical centers are full of vulnerable patients, and so in preventing the spread of bacteria, it&#;s possible to save lives. Today, copper is used for coating everything from bed frames, door handles, and call buttons, to linen, scrubs, hospital gowns, and tongs. High cost is perhaps the biggest barrier to increasing the use of copper in medical environments.
Of all metals, copper has the highest electrical conductivity after silver. Equipment reliability is especially important in a hospital, and copper has proven itself to be a highly reliable material when used in electrical wiring. Copper is a malleable metal, which means it can be pulled and twisted and still not break. That&#;s one of the reasons it makes a great choice for copper wiring. As such, copper wiring is used frequently in medical equipment to send electrical currents from one point of a device to another, or to transmit signals to diagnostics tools and implants. If these electrical signals are not safely and reliably transmitted, hospital equipment is at risk of malfunction or breakdown, which could result in the injury or death of a patient.
Copper has a relatively high melting point of 1,984 degrees Fahrenheit. Plastic, by comparison, will start to soften at 300 degrees and begin to emit smoke whenever it is exposed to flames. This is another reason why copper tubing and coatings are excellent choices for medical devices, serving to reduce smoke and fire risks. In recent years, copper has proven to be a critical component of respiratory care systems, dispensing compressed medical air, like oxygen and nitrous oxide, to critically ill patients. It is also used to operate medical vacuum systems, which are designed to remove gasses and fluids during surgical procedures. In addition, copper is much more resilient to heat damage. A plastic tube will expand and contract significantly when exposed to intense heat, which means equipment would likely need to be replaced following a fire.
Electromagnetic Interference (EMI)/Radio Frequency Interference (RFI) shielding reduces instances of electronic device or equipment malfunction by (a) preventing unwanted external electromagnetic waves from interfering with the device or equipment, and (b) preventing any generated internal electromagnetic waves from interfering with surrounding devices or equipment. Pre-tin plated steel and copper alloy 770 (a copper, nickel, and zinc alloy) are most commonly used for RFI / EMI shielding because they are affordable and fairly resilient. Copper, however, is perhaps the best choice thanks to its ability to effectively attenuate magnetic and electrical waves. In a medical setting, this proves useful for MRI facilities.
Copper production has been growing steadily over the past decade. From to , annual global production increased from 16 million metric tons to 21 million metric tons. Today, there are around 250 copper mines in operation in about 40 countries. Currently, Chile is the world&#;s largest copper producer, the global leader in copper mining, hosting the world&#;s largest copper mine, accounting for 23% of the global copper mine production.
Image Credit: Shutterstock/Arsel OzgurdalPure copper metal is extracted via a multi-step process. It involves mining and then concentrating the ores before smelting and refining to produce a pure copper cathode. Although global copper supply is expected to rise by 4.3% this year, the current rate of production growth will likely not keep up with demand in the years to come. Overall, copper mining supply has grown less than 2% each year since .
To meet demand, it will be necessary for mining companies to establish new production plants, leverage alternate materials, and raise prices to incentivize more mines to come online. New, large-scale production plants are also cropping up. Last year, Denkai America announced the details of a $430 million project to establish a new North American headquarters and production facility. The Augusta, Georgia, site is slated to produce electrodeposited copper foil, mainly for the automotive industry.
Statistics show that price hikes are already happening. In June , copper prices plummeted and went into a bear market, but have since been steadily increasing. For example, from March to mid-April , there has already been a 6.7% increase.
A large amount of valuable metals are unfortunately going to waste. There is significant potential for recycling these to support the energy transition and combat climate change. With the growing demand for metals like copper, aluminum, and rare-earth minerals in renewable energy technologies, there&#;s a pressing need to harness these resources from discarded electronics.
The United Nations&#; latest report on e-waste reveals the vast amounts of valuable metals ending up in landfills, including those crucial for low-carbon technologies. While aluminum and copper see some recycling, other metals like neodymium are largely neglected due to technical and logistical challenges.
Better recycling policies and technologies are essential to unlocking the full potential of e-waste as a sustainable metal source, with initiatives like the European Council&#;s new regulation aiming to increase metal recovery from recycled sources. Ultimately, maximizing metal recycling from electronic waste presents a critical opportunity to enhance resource security, reduce environmental impact, and advance the transition to clean energy.
In conclusion, the surge in global copper demand is propelled by a multitude of factors, including the steady rise in annual copper demand driven by the expanding global economy and the rapid adoption of green technologies. Despite efforts to increase annual copper production, global copper output and mine production are struggling to keep pace, leading to a widening copper supply gap.
Existing operations are facing challenges in meeting the soaring demand, necessitating the development of new copper mines to bridge the deficit. The need for refined copper production is more pressing than ever to meet the growing copper consumption demand across various industries. As the world continues its transition towards cleaner energy sources and infrastructure, the importance of copper as a fundamental component cannot be overstated. Therefore, proactive measures must be taken to address the supply-demand imbalance and ensure a sustainable future for the copper industry.
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