Copper demand surges as the world transitions to zero carbon emissions

Copper’s demand has been soaring high with a worldwide emphasis on green energy as the best bet to curb the climate crisis,.

On 8 May 2021, prices of the tawny metal pushed above $10,440 a tonne in London, the highest since 2013.

Copper prices have been seeing an upward climb of more than 30 percent this year and have more than doubled from the lows in March 2020.

Further, investors wagering big on copper’s vital role in the world’s green energy transition are expected to underpin the metal’s long-term gains.

According to Trafigura Group, the world’s top copper trader, and Goldman Sachs Group Inc. copper prices could hit $15,000 a tonne in the coming years with increased climate concerns. Bank of America also says $20,000 could even be possible if drastic issues arise on the supply side.

Driving the green revolution

According to a senior official at JSW energy, the industries that are likely to flourish with a push towards green energy include aluminum, iron ore, steel, silica, lithium, cobalt, and copper.

Still as an unmatched electrical and thermal conductor, copper is one of the best resources for the renewable energy (RE) sector.

Today, RE sources provide nearly one-quarter of the world’s power and copper plays an important role in making it as efficient as possible with minimal impact on the environment.

It is also one of the few materials that can be recycled 100 percent over and over again without a loss in performance. Besides being highly resistant to both atmospheric and aqueous corrosion it is valuable in RE systems.

“Copper is a highly efficient conduit, it is a critical component for solar panels, wind turbines, electric vehicles, and battery storage across the world. It also helps reduce CO2 emissions and lowers the amount of energy needed to produce electricity. In many RE systems, there is 12-times more copper being used than in traditional systems to ensure efficiency,” says Vikram Kailas, Managing Director, Mytrah Energy.

Worldwide copper usage jumped 38 percent over the last decade, from 17.8 million metric tonnes in 2009 to 24.5 million in 2019, largely driven by demand for renewable energy and cleaner vehicles.

Wind energy requires on average 2,000 tonnes of copper per gigawatt, while solar needs about 5,000 tonnes per gigawatt. Meantime, Electric vehicles can contain between 40 kg and 83 kg of copper, while an internal combustion engine needs an average of 23 kg, according to the International Copper Association.

Industry sources break it down further and say in India for every megawatt (MW) of wind power about 3.6 tonnes of copper is needed – and for every MW of photovoltaic solar capacity, about 4-5 tonnes of copper is required.

Supply crunch

The copper market was one of the first to react at the onset of the Covid-19 pandemic, with prices slumping by more than a quarter between January and March 2020.

However, seemingly endless Chinese demand has been the main driver of copper’s recent gains. China alone accounts for more than half of the world’s copper imports. So far this year, it has already imported more copper than it did throughout all of 2019, according to data cited by Bloomberg.

Besides the surge in copper demand can also be attributed to evidence of recoveries in other major industrial economies, with manufacturing output surging in places like the US, Germany, and Japan.

Moreover, with several nations pledging to spend heavily on decarbonizing their economies, drawing up RE and infrastructure-heavy spending proposals, big bets are on sectors that will be looking to consume large amounts of copper and metals going forward.

However, as investors have been piling into copper it implies that the world is going to need a lot more of the metal, putting a strain on supply.

Market analysts caution that the estimated annual copper supply shortfall could be as high as 10 million tonnes by 2030 if no new mines are built.

“But there are only a few new large copper mines coming into production over the next decade as mines are hard to find and expensive to develop,” says Kailas.

Shampa Bahadur has been a business journalist for more than two decades. She has written for Business India, PTI Media TransAsia and India Infrastructure Publication Ltd among others. She has also written coffee table books. She can be reached at shampa@indoasiancommodities.in

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