Let's Talk Copper
Here is an excerpt from the report I wrote back on February 6, 2024 …this is BEFORE my latest analysis on AI Data Demand Centers
For access to this report and others as well as our commodities alpha portfolio and private X feed …you can sign up at Damped Spring DSChigrl
COPPER
On January 8th, 2022, Isabel Schnabel, an influential member of the executive board of the European Central Bank, gave a speech in which she articulated: that the transition to renewable energy is needed, but it is likely to prove inflationary.
“Central banks, in turn, will have to assess whether the green transition poses risks to price stability and to which extent deviations from their inflation target due to a rise in the contribution from energy to headline inflation are tolerable and consistent with their price stability mandates. I will explain that there are instances in which central banks will need to break with the prevailing consensus that monetary policy should look through rising energy prices so as to secure price stability over the medium term.”
Europe and North America have committed to transition at all costs, and even asking Central Banks to look past inflation to get there.
That brings us to copper. China, once the largest consumer due to their insatiable appetite in growing the property sector, will no longer be the buyer of last resort as the West pushes forward relentlessly in their quest for net zero agenda and Paris Accord commitments. Thus, the collapse in the Chinese property sector and subsequent decline in macro indicators will have minimal bearing on global copper demand as Western demand accelerates.
COPPER DEMAND
Copper required for EV’s (not including battery or charging stations)
Conventional ICE vehicle: 18-49 lbs.
Plug in hybrid electric vehicles: 132 lbs.
Battery electric vehicles: 183 lbs.
Hybrid electric bus: 196 lbs.
Battery electric bus: 814 lbs.
Copper can easily be shaped into wire, which is important for most electrical applications. It’s also important to note that temperature does not affect copper’s conductivity, which makes the metal ideal for automobiles in all climates.
Renewable Energy Plants
In terms of tonnage of copper per unit of installed electricity, renewable energy plants need more copper than traditional thermal power plants. Copper usage is four to six times higher in renewable energy systems than in fossil fuel or nuclear power plants.
Wind Turbines
A single wind turbine is made up of 335 tons of steel, 4.7 tons of copper, 3 tons of aluminum, and 700 pounds or more of rare earth materials. Offshore wind turbines require even more copper to connect into inland generators with this totaling 10,54 tons of copper per megawatt.
Solar Panels
Solar panels require 5.5 tons of copper per megawatt.
COPPER SUPPLY
There were two MAJOR setbacks in 2023 to copper supply.
1. Panama ordering the closure of the Cobre Panamá project after First Quantum Minerals triggered mass protests.
With 6.8 trillion lbs. of proven and probable reserves, Cobre Panama was one of the largest new copper mines opened globally since 2010 producing more than 660 million lbs. of copper per year along with gold, silver and molybdenum. This was equivalent to 1.5% of global copper production as of 2023.
2. Anglo American cut copper output targets on poor Chilean grades. Anglo reduced its copper production target for 2024 by about 200,000 tons, essentially removing the equivalent of a large copper mine from global supply, saying that production will fall even further in 2025.
We could add a third.
3. Unrest in Peru, a South American nation that accounts for 10% of the global copper supply faced major violent protests at the end of 2022/ beginning of 2023 (following the ousting of President Pedro Castillo on 7 December 2022) causing big traders like Glencore to suspend copper operations. These threats have since subsided, but this political powder-keg is still on everyone’s watch list.
The sum of these events dynamically changed the 2024+ copper supply/demand landscape.
DISCLAIMER: This material is presented solely for informational and entertainment purposes and is not to be construed as a recommendation, solicitation, or an offer to buy or sell / long or short any securities, commodities, or any related financial instruments. Please contact a licensed professional before making any investment or trading decisions.