CRU: Electric Vehicles Could Have Long-term Implications for Copper Supply as well as Demand

CRU: Electric Vehicles Could Have Long-term Implications for Copper Supply as well as Demand

PR Newswire

LONDON, February 13, 2018

LONDON, February 13, 2018 /PRNewswire/ --

Over the last year, the copper price has taken a further leg up, from $6,000/ t to over $7,000/ t. Indeed, recent trading levels have been higher than our last estimate of the incentive price, or long run marginal cost (LRMC), required to build new brownfield or greenfield mining projects, which was set at $3.00/ lb ($6,614/ t).

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With a more compelling electric vehicle (EV) story now being told, many argue the copper market will face such heavy deficits by the mid to late 2020s that the long run price will have to be much higher than this in order to attract sufficient investment.

The EV demand forecast fog is clearing
While there remains considerable uncertainty over future EV production levels, 2017 witnessed a number of policy commitments aimed at phasing out the internal combustion engine (ICE) by governments around the world. The most significant of these came from China, where in November 2017 the government announced a new framework of policies comprising a potpourri of production quotas, fuel efficiency targets and credit trading schemes.

As a result, not only are our EV forecasts higher than a year ago, but pure battery electric vehicles (BEVs) that consume around 80 kg of copper per vehicle, compared to 30-55 kg in hybrid models, now account for upwards of 50% of the total compared to less than 30% previously. In addition, the infrastructure piece should not be forgotten as it could add 30-50% to copper demand over and above that just in the vehicles themselves. This is not just charging points, although they are important especially if impatient drivers insist on ultra fast charging. The associated growth in renewable energy is also a potential boon to copper demand because on a per megawatt (MW) basis it generally requires more electrical windings, associated cabling and central infrastructure such as transformers, inverters and switchgears. Beyond that the electrification of the transport sector will necessitate additional investment in distribution networks and substations as well as the development of energy storage solutions.

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CRU offers unrivalled business intelligence on the global metals, mining and fertilizer industries through market analysis, price assessments, consultancy and events.

Since our foundation by Robert Perlman in 1969, we have consistently invested in primary research and robust methodologies, and developed expert teams in key locations worldwide, including in hard-to-reach markets such as China.

CRU employs over 260 experts and has more than 10 offices around the world, in Europe, the Americas, China, Asia and Australia - our office in Beijing opened in 2004.

When facing critical business decisions, you can rely on our first-hand knowledge to give you a complete view of a commodity market. And you can engage with our experts directly, for the full picture and a personalised response.

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