Home' Australian Resources and Investment : June 2019 Contents Copper prices may still be being buffeted by China grow th jitters
or US trade war tensions, but the mood at the recent CESCO
annual global copper get-together in Chile was upbeat.
At the heart of the optimism were predictions that copper supply
faces even higher disruptions this year, leading to a global deficit.
Just how big depended on whom you asked.
New research from Adroit Market Research shows that world
copper demand is projected to reach more than 30 million tons by
2025, up from about 24 million tons from last year. In fact, no-one
expects copper demand to ease as it becomes the go-to metal for the
modern world – namely electrification and clean energy.
New or expanded mines – particularly in Chile, the United States
and Peru – have now been green lighted and are expected to add an
extra one million tons to supply by 2024. Not everyone is convinced
that this will be enough, though, especially in the next few years.
Morgan Stanley is one of them. It’s made copper its top metals
pick, saying it sees the market heading to a deficit of 406,000 tons
this year and 187,000 tons in 2020.
That’s in contrast to major CESCO sponsor CRU Group. The
company dialled back an earlier deficit call, saying instead that the
world will see a surplus – albeit small – for the next two years, a
sentiment echoed by Macquarie Bank. CRU does, however, agree that
deficits are looming, forecasting a 270,000 -ton shortfall by 2023.
There’s no doubt that supply faces some major challenges in
the short term. Glencore, ERG Resources, Freeport and MMG have
recently talked up mine disruption, while Chilean miner Antofagasta
told Reuters at CESCO that climate and other delays will cut nearly a
million tonnes off their copper production this year.
The world’s biggest copper producer, Chile, is also reporting its
lowest production levels in over two years. At the same time, state-
owned miner Codelco is warning of falling rates if modernisation of
the country’s ageing mines is delayed much longer.
SMART, CLEAN WORLD
There were no disagreements between miners or analysts when it
comes to copper demand. As a CRU spokesperson told CNBC at the
conference, ‘Copper is going to be central to the green revolution’.
While the jur y may be out on just how long that revolution will
take – particularly here in Australia, which has lagged the world
on electric car take-up – there’s no denying that change is already
here. Miners at CESCO were all talking up what it will mean for the
‘We know that the future of a modern, efficient digital world
is copper,’ Don Lindsay, Chief Executive of Canadian miner Teck
Resources Ltd, told the media at the conference.
The smart home sector is one of them. Witnessing nearly
27 per cent grow th this year, it’s expected to ship 1.6 billion devices
by 2023 as consumers adopt multiple dev ices driven by huge
companies like Alphabet, Amazon, Apple and Samsung.
Two categories alone – Alphabet’s Nest thermostat and Amazon’s
Alexa personal assistant – will consume around 1.5 million tonnes of
copper by 2030, up from 38,000 tonnes today according to consultancy
firm BSRIA. The company estimates that most smart homes use 1000
metres of wiring to connect devices for a total 20 kilograms of copper.
Clean energy is another. The International Energy Administration
says that over 55 per cent of copper consumption will come from energy
transmission and distribution to 2040. The International Copper
Association estimates that copper demand for wind energy in 2018
accounted for over 38 kilotons, and will reach nearly 50 kilotons by 2020
a typical wind farm can contain as much as 15 million tons of copper.
But electric vehicles glittered like no other at CESCO. Electric
motors and batteries use up to three times as much copper as
traditional cars, and in 2017, sales surpassed one million units and
increased by over 50 per cent on the year before.
Expect that trend to soar over the next decade as car companies
commit to all electric fleets, governments support their production and
sales with incentives, prices keep falling, and range and performance
improve. In fact, market darling Tesla warned recently that the world
faces an electric battery metals shortage, including for copper and nickel.
That’s now occurring in the world’s biggest car market in China,
responsible for 60 per cent of global electric vehicle sales and half
of all charging infrastructure. Electric car production w ill rise by
53 per cent according to Citigroup, who says that copper for electric
cars will make up two-thirds of demand growth for the metal
between 2018 and 2030.
COPPER TO THE WORLD
All those trends w ill be on show at South Australia’s Copper to the
World Conference on 17 and 18 June, where miners like BHP, Oz
Minerals, Anglo American and Newcrest will speak in a session on mine
innovation hosted by the International Copper Association Australia.
Now in its third year and at the heart of the state’s efforts to
dominate Australian mining, the conference aims to be as important to
the copper industry in the Asia-Pacific region as CESCO is globally.
Is peak copper back?
The red metal may still be facing pressures, but the industry is
betting that modern life can’t live without it, says Steve Freeth.
AUSTRALIAN RESOURCES & INVESTMENT
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