Tuesday, April 13, 2021

"Chinese Firms Position for an Energy Transition Copper Supercycle"

As commended to our attention by Neil Hume, the Financial Times' natural resources editor, not to be confused with Australia's DJ Neil Hume. This Neil Hume elicits pure rapture:

Mr. Hume is held in quite high esteem in certain quarters. Here's an example from 2017 when he dropped in to Bryce Elder's playhouse Market's Live:

....BE This is Markets Live, FT Alphaville's daily thing with the typing and etc.

BE And good news! I'm not solo today.

BE Because joining me is Neil Hume.

NH Hola

BE Neil's FT's commodities editor these days. Though you'll probably know him better as founding member of the AV team and the editor for two years through the sov debt crisis.
erlkin  neil hume rocks
  AAAA  bonjour les amis !
                               Boncoeur  crikey, Neil Hume is in da house!

NH Mining and Commodities - they gave me more work to do....

Thinking about it, I imagine DJ Neil Hume may have also garnered a "crikey, Neil Hume is in da house!" upon occasion. But not from the rabble.

Be all that as it may be, from the blog of Houston's Rice University Baker Institute blog, April 5:

If China’s dominance of rare earth element supplies is the global energy transition’s “elephant in the room”, then copper is the 800-pound gorilla.  China’s push for outbound investment, with attendant strategic nuances, are a hallmark of emerging concerns about raw materials supply chains. Chinese firms recognize copper’s value from at least four perspectives. First, relative to internal industrial demand, China’s domestic production is inadequate. Second, as Chinese outbound investment has evolved to procure supply, they also are positioning themselves to capture international commodity trading opportunities. Third, Chinese outbound investment does help to enlarge the supply pie for a key raw materials essential to ongoing economic growth and for new energy systems, including those within China aimed at reducing pollution. However, China’s rush to build “green energy” scale and global market heft have fostered expansion of industrial pollutants as well as greenhouse gas emissions. Fourth, strong positions in the copper value chain can facilitate China’s larger industrial policy goals of making China-based enterprises, often “locally” controlled, indispensable hardware and technology suppliers for new energy development worldwide. These dynamics constitute the driving force behind a likely copper supercycle, as global supply comes under significant pressure from green energy ambitions.

How Much Copper is Enough?

Alternative energy systems have a high—and often, unappreciated—materials intensity, of which copper is a major constituent. For instance, every thousand battery electric vehicles (BEVs) produced can require approximately 83 metric tonnes (MT) of copper (well more than triple conventional vehicles at 23 MT), while wind turbines incorporate 3.6 MT of copper per megawatt (MW) of output, photovoltaic cells 4-to-5 MT per MW, and flywheels for pumped hydropower 0.3-to-4 MT per MW.

To quantify the relationship, 30,000 BEVs can consume as much copper as a skyscraper, like the 600,000 square meter Yi Fang Center in Shenzhen (Chinese buildings are close to 50% of global building stock). To turn over just 1/3 of the global passenger vehicle fleet (China currently comprises about 1/3 of passenger vehicles in operation) would require placing into service more than 300 million BEVs. These could collectively contain 20 million tonnes of copper, almost equal to current annual total world consumption, or about a fifth of the entire copper metal stock that analysts estimate currently sits in Chinese buildings and vehicles.

With alternative energy systems five times more copper intensive on average than their conventional counterparts, the push away from fossil fuels could strain global copper supplies, perhaps significantly. Energy transition goods will have to compete with traditional demand sources precisely as the pipeline of new copper extraction projects reaches its lowest level in the last century and risks compressing supply....


Long time readers may remember the Baker Institute for their oil coverage, including such hits as 2008's "Linkfest from the James A. Baker Institute blog: "The U.S. Dollar and Oil Trading"".

Recently via Mr. Hume:
Wood Mackenzie: "Build Or Buy: Are The Copper Majors Rising To The Growth Challenge?""