“Doesn’t everyone know about the copper situation?“

I sat in my friend’s living room, talking with him about commodities. I mentioned the looming copper shortage, but he thought the supply shortage was overblown. He cited the recent decline in copper price as evidence:

But this doesn’t tell the whole story.

You see, copper isn’t easy to substitute. For example, aluminum can substitute for copper. BUT…

According to The Air Conditioning/Heating/Refrigeration News:

It must be pointed out that motor efficiency is much more complicated than the great copper vs. aluminum debate. It is possible to match the power performance of a motor wound with aluminum to a motor wound with copper.

But since aluminum requires more turns and/or a larger diameter wire, this may not always be economically feasible in some applications.

That means we need copper for motors. And to be clear, every electric vehicle uses four electric motors – one for each wheel.

And EVs are selling like crazy in China. According to the Wall Street Journal, 5.7 million EVs sold in 2022. That’s equal to about 42% of all the cars sold in the U.S. last year.

And China’s EV market forecasts predict it will reach 7.5 million vehicles in 2027.

According to the Copper Alliance, EVs alone added 600,000 metric tons of new copper demand in 2022. To put that in perspective, that equals roughly half of the production of the world’s largest copper mine. And the demand is only getting larger.

Here’s the whole forecast:

I highly recommend you read the whole Factsheet on EV’s impact on copper demand. It’s enlightening.

The other key point to note is that there aren’t any copper demand segments going away. Batteries are more important than ever. And as we add demand for community scale batteries, to store solar and wind power, demand will continue to grow.

That’s why copper is a major focus for our portfolio in 2023.

Sincerely,

Matt Badiali