In this series, we’ve worked from the niche battery metals all the way to the largest which is “big copper”.
Copper is particularly interesting as Electric Vehicles represent a new area of incremental demand. The average E.V. requires 80kg more copper than a regular vehicle. There is also significant copper needed to build out E.V. infrastructure in the power grid as well as battery charging infrastructure.
Last year there was a detailed study published by Glencore which looked at how much incremental copper demand would come from this new market. They showed that E.V. would create 4 million tons of new demand by 2030. This is 17% of last years world mine supply and where it will come from is anyone’s guess.
Currently, there are serious issues with declining grades, permitting issues, and environmental constraints. The industry has been under-invested in new supply due to low prices. The current copper price is $7200 per ton, and this structural deficit will likely grow.
The industry is not going to invest in new capacity until incentivized by much higher prices. The capital intensity of a new ton of metal is about $10,000 per ton. Four million tons multiplied by ten thousand implies a need for a 40 billion dollar capital investment.
He discusses three copper plays each with their own risk profile. First Quantum, Nevada Copper Corp., and Gold Reach Resources.
The copper demand picture is unprecedented in comparison to anything in the last twenty years. Copper demand is linked to GDP growth, and the E.V. market will thus bring additional somewhat unexpected demand.
The iPath Bloomberg Copper Subindex Total Return Sub-Index ETN (JJC) closed at $36.74 on Friday, up $0.01 (+0.03%). Year-to-date, JJC has declined -2.13%, versus a 4.14% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Palisade Research.