This is our second article on metals and the value of having them in your long-term, investment portfolio. We spoke of Platinum previously and will discuss Copper [CU]. Global copper demand is expected to increase by nearly 20% over the next 6-7 years from nearly 24 million tons to approximately 30 million tons by 2026/7. A leading proponent that is moving this indicator is the increased requirement for copper in Electric Vehicles (EV).
Electric Vehicle production and sales are rising and not only at Tesla. New to the All-EV landscape are companies like Ford, GM, Rivian (Ford Invested $500B), KIA, Lucid and others. The aforementioned manufacturers are expected to have EVs in U.S. showrooms in 2021. This does not include any international sales, including sales in the exploding Chinese EV market.
We are seeing a positive outlook for the short-midterm global economy. Covid-19 cases dropping and vaccinations rising. The positive economic news and shifting ideologies toward clean energy will likely lead to copper consumption increases. EV and economic growth will drive mining project expansion.
Did you know, Copper is essential in electric vehicles? The average combustion engine automobile has about a mile of copper wiring and 45 pounds of Copper in it. This includes the alternator, wiring, etc. The average hybrid vehicle has 2 times the amount of copper in it as compared to internal-combustion autos (90 pounds). The average [full] Electric Vehicle has 4 times as much copper as the ‘traditional’ gas-powered automobile. That’s 180 pounds per vehicle! Additionally, an in-home EV charger usually has about 1-2 pounds of copper in them.
The International Copper Association copperalliance.org predicts the additional transition to “Smart Cities” will also increase demand for Copper. As the demand for clean energy, smart cities, and EVs rises, the need for a robust supply chain will increase as well. There are expected to be 25+ million EVs on the road by 2027/8. The increased demand will boost EV-related copper to nearly 1.8 million metric tons over the next 6-7 years. As the big automakers like GM and Ford transform their fleets to all EVs, those totals may end up being conservative.
We are on the verge of a supply/demand issue in Copper. Consumption is growing but supply has not kept up with the demand. The price per tonne of copper has gone from $2.26 at the height of the pandemic lockdown (March 2020) to $3.63 as of February 1, 2021. This is largely due to underinvestment in new mining capacity and increasing demands of EV and opening the economy.
Many analysts expect the copper market to be depleted which will cause continued increasing prices. The increase in prices will allow miners to invest in new projects to keep up with demand. We should be entering a “sweet-spot” period where miners can increase investment in projects, thus, increase production while increasing prices. Much like what happened with oil during fracking expansions. As the world economies move to EVs, it may be a good time to take another look at Copper (CU). It’s only R2Cents. Please do your own research.
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