2021 has witnessed a meteoric rise in copper prices as the metal gains traction after an expectant global economic recovery. The COVID-19 pandemic has given market participants time to reflect and analyse the future by which most avenues lead to or have some association with copper.
Versatility of Copper (Cu)
Copper has traditionally been seen as a barometer for economic growth due to its extensive use in industrial activity which may increase its correlation and importance to growth as the red metal finds its way into more and more applications.
Five of the latest and most talked about stimuli for the future of copper includes:
Electric Vehicles (EVs)
As we know, the âTechnoKing of Teslaâ is the most prominent name linked with EVs â the largest seller of EVs in the world. Muskâs recent call for an increase in metal supply which includes copper has been heeded as copper is an integral metal used in the EV production process.
From hybrid electric to battery electric, copper is included in multiple component parts which will only create an increased demand as the mandate for EVs increase â evident in the latest IEA EV report charts below. Many developed countries are stamping out petrol and diesel powered vehicles which only intensifies the scope for EVs and paves the way for higher copper prices.
Global electric vehicle stock by region, 2010-2020
Source: International Energy Agency (IEA)
Global electric vehicle stock by transport mode, 2010-2020
Source: International Energy Agency (IEA)
5G
Copper cable for the much talked about 5G network will be essential as the next stage in telecommunications technology. The will ultimately result in reduced latency, higher speed and greater capacity.
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Renewable Energy
The intermediary capabilities of copper holds a strong place in the composition of energy storage technologies. Copper basically allows for less energy usage when producing electricity which supports the important notion of âclean energyâ, thus lessening the negative consequence on the environment.
Recyclability
Copper is 100% recyclable which means it can be used/treated over and over without comprising quality. Some products cannot use recycled copper but the majority of copper used in industry is largely recycled.
Supply Disruptions
Supply might be the biggest problem facing copper at the present time. The demand-side is extremely promising while copper supply struggles to keep up. The lack of new deposits and the content nature of existing mining companies may cause a massive deficit in copper to unfold over the next few years. This should further bolster copper prices which are already at all-time highs (see chart below).
Monthly Copper chart:
Chart prepared by Warren Venketas, IG
Copper has cemented itself as the âlow-carbonâ metal of the future. As environmental awareness and technology gathers favor around the world, copper will likely continue to be at the forefront of discussion. Fundamental factors (both supply and demand) seem to point toward a bullish copper forecast over the next few years at least which makes copper the one to watch!
