Running out of Dr. Copper
In season four of “Frankie & Grace,” Grace (Jane Fonda) falls for a scam where a contractor steals the copper pipes from the house she shares with Frankie (Lily Tomlin). The contractor has half a dozen men supposedly doing a repair and when Grace returns, the pipes are gone. Copper these days goes for $3 a pound or so and these thefts really do happen. Imagine the ripoffs if copper reaches $7 a pound.
Leigh Goehring told Jim Grant that’s where copper is headed, given how many electric vehicles will be built. EVs require three to four times the copper as traditional vehicles. He told Grant it will add 50 percent to the amount of copper demand. With all of southeast Asia electrifying, increased renewable energy, and electric cars, the demand for the red metal will be robust, while “we’ve run out of easily mined copper,” says Goehring.
That’s quite a claim. It’s backed up by mining industry experts. Cecilia Jamasie writes for Mining.com, “Copper demand will surpass supply earlier than expected, with the first clear signs coming as early as next year, experts attending the 17th World’s Copper Conference being held this week in Santiago, Chile, said.”
“We anticipate global market supply and demand will keep close to balance in 2019 and 2020,” said Arnaud Soirat, chef executive for copper and diamonds at Rio Tinto. Beyond that, the deficit will become increasingly evident.
The Business Insider reports,
According to Bloomberg New Energy Finance, BEVs will account for 54 percent of all new car sales by 2040. That year, China, Europe and the U.S. are expected to make up 60 percent of the global BEV fleet.
This could have a huge effect on copper prices over the next 10 years and more. With fewer and fewer large deposits being discovered, demand should accelerate from 185,000 metric tons today to an estimated 1.74 million tonnes in 2027, according to the International Copper Association.
Putting a copper mine into production takes decades, in some cases. It’s not easy to find economic deposits, the permitting takes years, often in hostile political climates, with millions to be spent bringing infrastructure to the jungles, mountains, or deserts where copper is located. Billions of dollars must be spent and governments often change the rules to extract more tax money when a deposit is proved up.
As it is, existing mine production will drop from 20 million tonnes to below 12 million tonnes by 2034, leading to a supply shortfall of more than 15 million tonnes, says CRU analyst Hamish Sampson.
Sampson told the 17th World’s Copper Conference in Santiago Chile that over 200 copper mines currently in operations will reach the end of their productive life before 2035.
Ms. Jamasie quotes, Colin Hamilton, managing director of commodities research at BMO Capital Markets, “What we’ve seen is a shift from invisible to visible stockpiles.” Importantly, visible Chinese inventories are lower than in recent memory.
“He believes the expected copper supply crunch will become ‘much more real”’in 2019,” Jamasie concludes, “due to the lack of mega-projects coming on stream before the mid-2020s and as global production will peak by the second half of next year.”
Dr. Copper is said to have a PHd in economics, because “of copper's widespread applications in most sectors of the economy - from homes and factories, to electronics and power generation and transmission - demand for copper is often viewed as a reliable leading indicator of economic health. This demand is reflected in the market price of copper.”
However, “a temporary shortage of copper may lead to rising prices even as the global economy is slowing down.”
With the planet going green, Arnoud Balhuizen, chief commercial officer of Australian mining giant BHP Billiton, says copper is "the metal of the future."
Your house is loaded with the red metal. Copper thieves can’t wait.