Copper is back and it is here to stay, experts said during last week’s Investing in African Mining Indaba in Cape Town. Green energy, clean tech such as electric vehicles and digital innovations are key role players.
The past decade has been a tricky one for copper. Ten years ago, the global financial crisis plunged the metal’s price from $8600 per tonne in April 2008 to $3200 in January 2009 due to a plummeting demand. Copper has made a comeback, albeit not without hiccups. Since peaking at $9870 per tonne in February 2011, its price has fluctuated substantially. The past few months, however, were dominated by growth: last week, copper climbed towards the $6,200-mark.
According to Phil Hopwood, Deloitte’s Global Mining and Metals Group, there is more growth on the horizon. “Copper, in Africa and elsewhere, offers many interesting opportunities right now. At the moment, it doesn’t take much to disrupt the market,” he explained, referring to the growing copper demand from various emerging but increasingly powerful sectors including the digital space, renewable energy and clean tech.
Copper, in Africa and elsewhere, offers many interesting opportunities right now
The electric car industry, in particular, is becoming an important off-taker, simply because of its growth. The 2018 Electric Vehicle Outlook report by Bloomberg New Energy Finance shows the number of electric vehicles sold in the second quarter of 2018 (411,000) was 77% higher than the number of sales in the same period the previous year. China accounted for 225,000 units, followed by Europe and the US.
Bloomberg expects the number of electric vehicles sales to grow from 1.6 million in 2018 to 11 million in the next six years, then surging to 30 million in 2030 as they become cheaper to make than internal combustion engine cars.
The reason why this sector is important for the copper industry is because of its copper intensity. According to the Copper Development Association, electric cars contain 183 pounds of copper each, as opposed to 18 to 49 pounds for conventional cars. Electric buses comprise 814 pounds compared to 189 pounds for hybrid buses. This is over and above the copper needed to manufacture charge ports and related infrastructure.
Despite these positive prospects, Hopwood noted that investors will remain careful in terms of where they will invest their money. They won’t blindly follow demand forecasts. “It is difficult to predict the future demand as things never go as you expect it. History has taught us that cycles are never the same,” he said. “Investors are nervous because they have been burnt in the past. As a result, there hasn’t been a lot of investment in new copper mines. Most copper mines are old.”
Copper’s popularity will likely change this scenario, a recent copper outlook report by Fitch Solutions suggests. Released in January 2019, the data predicts the global copper demand to increase from 23.6 million tonnes in 2018 to 29.8 million tonnes by 2027, a 2.6% annual growth.
This trend could lead to an annual global deficit of 247,000 tonnes, Fitch Solutions predict, noting this demand to remain undersupplied through to 2021 should production not be expanded.
Many Mining Indaba delegates seemed very optimistic about copper, particularly about African copper. Ma’aden, a Saudi mining company, was one of them. “We love copper, we think copper’s a great mineral to be in,” CEO Darren Davis told the Mining Indaba delegates. He added the company has plans to explore opportunities outside Saudi Arabia, a country with sizeable copper reserves, without wanting to divulge on possible locations.
“The Kingdom has potential, particularly in copper, but we’re some years away from finding something really transformative. We need to be global in more than just marketing, so we’ll look very carefully at opportunities to invest outside of the country,” he said, without wanting to reveal anything about potential targets. We will look selectively outside of the country to invest, including in Africa.”
See also: Copper’s next bull market?