FOOD FOR THOUGHT

The latest Copper Quarterly Report was released by Fitch Solutions Country Risk & Industry Research earlier this year, takes a look at what the outlook is for this precious metal, both for the foreseeable future and for the longer term, up to 2031.

The global economic forecaster predicts that copper’s role in the green transition will remain important, as this metal plays a central role in the production of renewables, including electric vehicles (EV) and solar, wind and other generators of greener energy.

While cars that use traditional combustion engines also require copper in manufacturing, there is a marked increase in its use when it comes to EV. In fact, states the report, copper is used significantly more broadly in electric vehicles: conventional automobiles contain between 8kg and 22kg of copper metal, whilst plug-in hybrid electric vehicles (PHEVs) contain approximately 60kg of copper metal, and battery electric vehicles use an estimated 83kg of copper metal on average.

The Fitch Autos team forecasts an increase of 291% in global EV sales by 2031, which is expected to add to copper’s already high demand in the market over the long term, even if copper consumption growth is expected to slow in the coming decade, compared to the one that preceded it.

As it stands today, demand of copper outstrips the available supply, which is why Fitch Solutions’ forecast of copper production remaining in growth territory is heartening.

With this being said, disruptions to the copper production supply chain are expected, as persistent supply issues plague Latin America. Strikes and other protest action have been rife in both Chile (which produces 8% of global copper — this country is the world’s leading supplier of this precious metal) and Peru (which tails Chile and is the second-largest producer of mined copper in the world).

In the short term, copper production H222 is expected to see a lower average copper price than H122, following lower growth from Mainland China after Covid-19 restrictions, a stronger US dollar, and demand in the renewables industry, while the effect of protest action on copper supply may assist in driving its price up.

Even so, with the market expected to remain in deficit over the next decade, the H222 average is expected to exceed the current price of copper, with a slow but steady uptrend forecast for the remainder of the decade.