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Renewable Energy Demand Drastically Drives Up Copper Prices

By Cas Biekmann | Tue, 05/18/2021 - 09:14

Within the time span of one year, copper prices increased by 50 percent. The engineering metal is an invaluable part of the renewable energy supply chain is one of the main drivers of this trend. The sharp price hike will therefore have consequences for miners and renewable energy companies alike.

Because copper’s properties make it an ideal electrical and thermal conductor. In fact, only silver would function better as a so-called ‘engineering metal’, but its wildly higher price per pound makes it less viable for many applications. Copper has become a critical component for the installation of photovoltaic solar panels, wind turbines, battery storage and electric vehicles, perhaps some of the most common components of renewable energy strategies worldwide. For renewable energy companies focused on sustainability, copper’s potential to be repurposed after other parts deteriorate offers a further interesting perspective.

El Financiero reported that high copper demand compounded with the challenges miners faced during the pandemic have increased copper prices by 50 percent during the last twelve months. For Mexican companies such as Grupo México, Condumex, Elementia, Xignux and Nacobre this provides plenty of opportunity, with the companies reporting significantly better results than during the same period in 2020. “The copper market focused firmly on meeting demand, as China quickly recovered from pandemic and green technology stimulus was ramped up in other countries, in a bid to pull their economies out of the crisis,” Carsten Menke, Head of Next Generation Research at private banking group Julius Baer told the outlet.

Increased prices could benefit companies in the clean energy environment on the longer run. Since copper is scarce, a ‘golden age’ will spur on mining companies to explore and produce more copper. This would prevent the shortage in copper that industry analysts predict the world is headed toward. Nevertheless, The Conversation outlines four challenges regarding sustainability that an increase in activity would bring along. Copper ore is often found in remote, perilous locations. Proposed projects also run into environmental and social opposition. And to reach deeper ore, more waste is generated and further expansive tailings storage is necessary.

But despite copper’s growing importance in modern infrastructure, Menke does not believe the world is headed toward a so-called super cycle, even though prices have increased plenty in the past period. “Chinese demand for copper will wane in the context of unfavorable demographics and the transition of the economy from investment-led growth to consumption-led growth. So, we do not see the copper market going into a super cycle,” he said. What is more, Menke even predicted that copper would start dropping in price before the end of 2021.

The data used in this article was sourced from:  
El Financiero, The Conversation, Reuters
Cas Biekmann Cas Biekmann Journalist and Industry Analyst