Two things are certain in life: death and taxes. But what about change?
Change is happening by the day.
Take a look at China, for example. Reneweconomy.com.au reported on 4 December:
‘The good news is that China, the world leader in electric vehicle production and use, has launched the world’s first all-electric, 2,200-ton cargo ship.
‘The ship is short-haul: It can travel about 50 miles with its 1,000 lithium batteries after two-hour charge, which is the loading and unloading time for the ship, state news site ChinaNews.com reports. So it can be charged while it is docking.
‘Sadly, the Chinese spoiled the launch of this otherwise green cargo ship by using it to transport coal for electricity generation on the Pearl River in Guangdong Province.’
That electric ship looks impressive. And, despite it transporting dirty coal today, that might change in the future.
China declared war on pollution in 2014.
Millions of people are about to join the middle class across the country. That should mean more demand for dishwashers, air conditioners, smartphones and cars. In other words, thousands more megawatts of electricity would be required.
That poses a problem.
Will coal always be the answer? Maybe in the short term.
China’s current grid can’t handle that much power demand without coal. That’s why its electricity grid needs a major upgrade. Mind you, a major upgrade is needed in most countries around the world. That’s good news for most commodities. But it’s great news for copper.
The metallic gold
Copper is one of the most — if not the most — important metals on the planet. Infrastructure and building construction, vehicles and military equipment needs lots of it. Plenty of other industries need copper too.
You may have heard it referred to as ‘Dr Copper’. That’s because the base metal is so widely utilised that some pundits use it to measure the pulse of the world economy. The copper price has surged to its highest level in six weeks. The metal is also up 20% for the year:
Source: Tradingview.com; Port Phillip Publishing
[Click to enlarge]
Copper remains in an uptrend, which you can see by the pink channel on the above chart. The blue channel shows copper’s short-term uptrend. In other word, the base metal still looks good, and could get hotter still.
Bloomberg reported on 8 November:
‘Demand for copper globally is set to jump 22 percent in as soon as five years on increasing usage of the metal in electric vehicles, solar and wind power sectors, according to Indian billionaire Kumar Mangalam Birla’s Hindalco Industries Ltd.
‘Consumption is seen rising to 28 million metric tons in the next five to seven years from about 23 million tons now, J.C. Laddha, head of the Indian company’s copper unit, said in New Delhi at an industry conference. Electric vehicles alone will boost global copper demand by 1.2 million tons, he said.
‘India is also expected to benefit from the electric-vehicle push as Prime Minister Narendra Modi seeks to turn all passenger car sales electric by 2030, Laddha said. “But even without the demand from electric vehicles, demand should rise to 1.8 million tons to 2 million tons,” he said.’
Laddha could be on the money. The global population should reach 8.5 billion by 2030. That could see copper demand surge.
Overpopulation is a real problem. Famine and disease are likely to grow when the need for quality clean air rises. Plus, as people ‘switch’ to a global communications network, copper should become more present in everyday society.
The long-term demand for copper has never looked better.
Aside from the obvious medical problems associated with disease, old cars — one of the main sources of pollution — are being banned across the world. Electric cars are replacing them, which could revolutionise the world.
Electric vehicles (EVs) need a lot of copper.
The average pure-battery-powered EV uses about four times more copper than conventional petrol-powered vehicles. That’s good news for copper’s medium-to-long-term demand, especially considering Tesla, Inc. [NASDAQ:TSLA] announced a semi-truck that needs energy from 4,000 homes to recharge.
Tesla’s story matters for copper
The Financial Times reported on 2 December:
‘The US electric carmaker unveiled a battery-powered truck earlier this month, promising haulage drivers they could add 400 miles of charge in as little as 30 minutes using a new “megacharger” to be made by the company.
‘John Feddersen, chief executive of Aurora Energy Research, a consultancy set up in 2013 by a group of Oxford university professors, said the power required for the megacharger to fill a battery in that amount of time would be 1,600 kilowatts.
‘That is the equivalent of providing 3,000–4,000 “average” houses, he told a London conference last week, 10 times as powerful as Tesla’s current network of “superchargers” for its electric cars. Tesla declined to comment on the calculations.
‘Elon Musk, Tesla’s chief executive, has previously said the megachargers would be solar-powered but the company has not confirmed whether they will also have a grid connection for when it is not sunny.’
Renewable energy is key to powering Tesla’s current superchargers. The company is also experimenting with storage batteries to ease the demand on the grid. Regardless of what happens next, though, one thing looks certain: Demand for copper should rise.
Remember, aside from electric car demand, the world needs a major power grid upgrade to handle EV demand. When the power grid gets an upgrade and EV demand starts to boom, copper demand is likely to rise along with it.
We could see both play out within the decade. And even if it doesn’t, the initial phase of the EV boom should demand more copper. That’s why you should keep copper on your radar in the future.
For Markets & Money