Move towards electric vehicles and cleaner energy to drive copper prices as major economies work towards zero-emissions

Copper prices are set to soar as demand for the metal intensifies as more and more countries press on with plans to turn their economies greener with focus on electric vehicles (EVs) and clean energy. With China, the world’s biggest automotive market, joining other major economies like the European Union in the push for more electric transportation, it looks like copper is on the verge of a super-cycle. China and Europe together will represent 72% of all passenger EV sales by 2030, driven by carbon emission regulations in Europe and China’s EV credit system fuel economy regulations and city policies limiting new internal combustion vehicle sales. While copper has been used in vehicles for decades, EVs use three times more copper than current non-EVs. Green industries In addition, the demand for renewable energy is contributing to pressure on copper prices. Goldman Sachs head of commodities research Jeff Currie said: “We have all the tell-tale signs of a super-cycle.” And he is not alone. Other analysts are also highlighting the impact of economic stimulus programs instituted by governments following the COVID-19 pandemic, which in turn is boosting demand for copper as well as other metals. A superconductor Further, being a highly efficient conductor of electricity and heat, copper is the number one metal used in renewable energy systems for power generation from solar, hydro, thermal and wind energy globally. Not to mention, copper itself is one of the best renewable resources being one of the few materials that can be recycled 100% over and over again without loss in performance. Civil and 5G infrastructure Copper is also widely used in construction wiring and piping as well as electrical transmission lines, making it a key metal for civil infrastructure renewal. It is a key component of the global 5G buildout, which requires more fibre and copper cable to connect equipment. Growing US market for EVs Although the US is behind other countries in the EV markets, it is expected to catch up in the 2030s, as it is seen as an ideal adopter of EV vehicles.  President-elect Joe Biden plans to shift the country towards wind and solar power, as well as EVs and has targeted to spend up to US$1.7 trillion over 10 years to boost renewable power and speed the introduction of EVs. China’s EV policy According to China’s State Council, sales of electric, plug-in hybrid and hydrogen-powered vehicles in China are forecast to rise to 20% of overall new car sales by 2025, to just over 5% currently. The country’s policy paper, as part of its five-year plan through to 2025, advocates for significant improvements in the technologies of China’s electric vehicle components and building more efficient electric vehicle charging and battery swapping networks. This paper also said the Chinese government would improve the green car quota system to guide automakers to make more environmentally friendly vehicles after it ended new energy vehicles subsidies and boosted sales for public uses such as bus and trucks. Europe’s EV policy Transport still accounts for nearly one-quarter of Europe’s greenhouse gas (GHG) emissions in Europe and the EU is committed to cut GHG emissions from transport and other sectors. The aim is to cut emissions by at least 40% below 1990 levels by 2030 and for transportation in particular, the target is to cut emissions by 60% compared to 1990 levels by 2050. Freezer production boosts demand It is not just EVs. Investment bank Citi, noted that the fear of food shortages in countries hit by COVID-19 lockdowns had pushed strong demand for freezers, causing a rush for copper. “We have seen an 80% year-on-year increase in freezer output in China, potentially reflecting COVID-19 related fears over security of food supplies,” Citi said. “A surge in air-conditioner, fridges/freezers and appliances appears to have supported changing consumer patterns in key export markets as people spend more time at home and their concerns about food security have risen. “The cooling sector includes refrigerator output that was up 22% year-on-year in November and freezer output up 80%, whereas air-conditioner production, which usually dominates this end-use sector, was up only 5.5%.” “Broader strength in-home appliance demand reflects a combination of strong property sales in China and likely increased levels of home renovation outside China.” The investment bank said Chinese copper demand had lifted global end-use copper to the highest level in almost four years, with more growth expected as other countries follow the Chinese recovery. Copper production drops in 2020 Industry experts are predicting that copper production fell in 2020, with supply expected to have fallen by 1.2% or 257,000 tonnes from 2019. However, in 2021, the global copper mining industry is looking at output to rise to 21.4 million tonnes from 1.36 million tonnes. Long-term production pressure According to the Commodities Research Unit, global copper mined production is expected to decline from the current 20 million tonnes to below 12 million tonnes by 2034, resulting in a supply shortfall of more than 15 million tonnes. It is believed that there will not be enough new mines in the pipeline to take over the 200 copper mines that are expected to run out of ore before 2035. Copper prices In mid-December, the red metal topped at US$7,964 a tonne, an eight-year high. Goldman Sachs is bullish, expecting the current copper bull run to continue well into 2022, with the metal likely to hit $10,000 per tonne for only the second time in its history.  Castillo Copper set to benefit Castillo Copper Ltd could be a clear winner with its (ASX:CCZ) (LON:CCZ) (FRA:7OR) Big One Deposit at Mt Oxide Project in Queensland, which could both develop into a substantial standalone asset or provide significant near-term, high-grade copper ore to a proximal larger discovery, according to UK-based broker SI Capital. Castillo has projects in Queensland, New South Wales and across the Zambian copper-belt as it seeks to become a mid-tier producer. The company has identified two stand-out targets at its Mt Oxide Project that could deliver potential scale and exploration upside: Big One Deposit and Arya Prospect. Drill logs and assays are expected to be announced for Big One this month.   The company is targeting shallow high-grade copper on the former mining lease close to Mt Isa and within the region's prolific copper-belt. Share prices have reflected the company's strong newsflow along with copper's ongoing rises and strong future fundamentals. From a low of A$0.01 in March 2020, Castillo has risen to as much as $A0.056 in late October and today shares have been as much as 12% higher to A$0.039. Aeris has ‘exciting results’ at Constellation Producer Aeris Resources Ltd (ASX:AIS) is another expected to benefit from the rosy outlook on copper as it recommences its drill program early this month after receiving high-grade results from the initial two drill holes at Constellation deposit of its 100%-owned Tritton operations in central New South Wales. Drill holes TAKD001 and TAKD002 both intersected high-grade copper mineralisation while a third EM conductor was identified from a down-hole EM survey on TAKD002. Large Havilah project Havilah Resources Ltd (ASX:HAV) (FRA:FWL) recently highlighted that reverse circulation drilling has demonstrated a wide zone of gold-copper mineralisation in the fault intersection area at West Kalkaroo project, to the east of the planned stage 3 gold starter open pit in South Australia. Long intervals of gold and/or gold-copper mineralisation were returned in all drill holes in the upper, oxidised saprolite gold-native copper zone as well as in the underlying sulphide zone. Kalkaroo is the largest undeveloped open-pit copper deposit in Australia on a copper equivalent (CuEq) ore reserve basis, with a 0.74% CuEq grade.