Copper: Looming shortage of copper projects with demand set to rise

Copper: Looming shortage of copper projects with demand set to rise

(high frequency electronic notes) – Jon Barnes from Roskill is
with me in the studio today. Jon, good morning, nice to see you. – Thank you. – Roskill’s first edition of the copper report,
looking at copper demand through to 2035, nice place to start. What are some of the main findings here? – Well one of the initial
conclusions that we’ve reached from our totally fresh look
at the copper industry, is that actually, the market
is a little bit bigger than most people think. We think demand is somewhere
between 30 to 31 million tonnes in terms of total consumption,
so that’s refined copper, and the direct use of
scrap by manufacturers. So, yes, the refined numbers
more or less what most people think, but, people have
underestimated the use on the scrap side of the business. – Right. What are your expectations
around the global drive, as far as demand for the metal? – Well, the most important
aspect of copper demand is that when you look
at the entire equation of all the uses of copper, more or less 90% of the
reasons that people use copper are for its electrical conductivity. So, 80% is directly used for
its electrical properties, further, 10% is indirectly used. So really, more demand for electricity means more demand for copper. – And where are you expecting
this demand to come from? Is Asia gonna be a big player? – Yeah, I mean, Asia you know, is 60 to 70% of the total market, and we really see that
demand in Asia is probably gonna grow by 50% from current levels, so, by the time we get out to
2035, it’s really gonna be three quarters of total
copper use is gonna be in Asia. – Right. And, tell me a bit more
about the split here, between the refined and the scrap. – Well, in the future, scrap
is gonna be more important, there’s gonna be more scrap
arising, more scrap is gonna be recovered, so, certainly, yes, they’ll be more use
of scrap by manufacturers, both at wire rod mills,
and the brass mills side. And, slightly less use of refined copper. But overall, yes, scrap
is gonna be a bigger part of the equation in the
future, it’s already a bit bigger now, and certainly, there’s quite a big investment
from the scrap industry to invest in new equipment and granulators to basically recover more
copper at end of life. – I’d imagine the growth
around electric vehicles that will play a part in copper demand? – Yes, I think it’s, in the medium term, it’s gonna be significant,
I don’t think it’s really the be-all and end-all of the expectations for growth. It’s difficult to put
a precise number on it. There’s a lot of variables
you have to put into play, in terms of what’s gonna
be the growth in the number of electric vehicles, what type of electric vehicles, what’s gonna be the cars, what’s gonna be buses, you know, the mix. But, we think it could be
between 1.5 to two million tonnes of additional copper usage
over what would have been used in internal combustion engine vehicles. And it’s a good story for copper, because, it’s more copper in the cars themselves, it’s more copper in the
charging infrastructure to basically prepare the way for this electric vehicle revolution. And then eventually, when
25 to 30% of the population owns an electric vehicle,
then there’s gonna need to be reinforcement of the
power distribution grids everywhere, so that
basically, when you plug in your electric vehicle
overnight to charge it, that the distribution grid
can handle the extra load. So, it’s a very good story
over quite a long period of time for copper. – Importantly, what about
the price of the metal? This year, so far, been
a bit disappointing. We’ve had the President
Trump, and the China issues, shall we say? – Yes, yes, it’s been disappointing. It’s not what the industry was expecting. The Moody, in Chile, several months ago, was more upbeat at that
time, copper prices were six and a half
thousand dollars a tonne. The expectation then was that prices might be closer to seven
thousand dollars a tonne by the end of the year, but right now, we’re back down at six. So it’s not a good short-term environment to get the copper mining industry ready to begin to invest the
big number of dollars that they need to, to
generate the next generation of new Brownfield and
Greenfield mine projects to prepare the way for
the increases in demand that will be coming forward. – Well, indeed, I suppose
just on that point, it’s all well and good
having the demand for copper, but if it’s not financially
viable to get the metal out of the ground, then
where do you go from there? – Yeah, it’s a difficult
equation to solve, but, fundamentally, more copper
demand is gonna be coming, and it’s a question of,
if the copper miners don’t invest now, there’s
a risk that you might see a big spike in prices. That can be very harmful. We could see another period
of very high copper prices causing substitution, losses,
and vulnerable applications. And that’s not in the
industry’s best interest. You know, what we would prefer to see is, copper prices remaining in a
steady and affordable range, between maybe six and eight
thousand dollars a tonne. A price that’s good for miners, but it’s also affordable for consumers. But for that to happen, we
need to see more announcements of new copper projects in the pipeline. – Jon, good to get your thoughts. Thanks very much for coming in. – Pleasure. Thank you, Andrew. (whoosh)

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