[Newsphopick=Kingsley Lim] Scientific and archaeological evidence suggests that copper was one of the first few metals used by human civilisations around 10,000 years ago. In parts of Asia, humans created weapons, coins and ornaments with copper. Also, an early discovery found that copper, when mixed with tin becomes bronze – an alloy that is harder, stronger, more fusible and resistant to corrosion than most metals. These series of developments and discoveries brought humanity from the Stone Age to the Bronze Age at around 2500 B.C.
Today that demand for the metal has not waned. We have found more uses for the metal than ever before. With the discovery of electricity and the invention of electrical products that run on electricity, copper has been a relatively cheap metal to use that is also a great conductor of electricity. Now it is used in cables, motors and transformers – components which utilize copper wires. Copper is also used in the wiring of homes and pipes.
There is now a widespread use of the metal in the global economy with China, US and Europe generating the majority of the copper demand. As countries and economies grow there is a general growth in demand for copper. So far, the beneficiaries of this trend have been the large copper mining companies that have licenses to extract copper from the ground. According to several studies, the largest copper deposits can be found in Peru, Mexico, Chile, Australia and the United States, where approximately 65 per cent of the world’s copper deposits are found. Researchers say that the world had mined 700 million metric tons of copper to date and there is still an estimated 3.5 billion metric tons of undiscovered deposits.
Factors that affect the price of copper
In general, copper prices have been on an uptrend for the last two decades. In November 2002, the price of copper was around US$1600. Today that price stands at US$6412 per metric ton. This can be attributed to the increase in demand for copper over the years. Hence, copper’s price is a barometer that reflects the general health of the economy. Of course, market observers have also attributed copper’s rise to China’s growth over the last decade. Therefore, when the global economy experiences an expansion, the price of copper would likely rise. If the global economy experiences a recession, the price of copper will fall.
This can be confirmed by looking at the last recession – the Great Financial Crisis. Before the Great Financial Crisis hit, copper’s price reached a high of US$8793 per metric ton in April 2008. Subsequently, it fell to a price of US$2790 in December 2008. While equity prices and stock markets were taking a beating, copper’s price fell in tandem. Why? That is because copper’s use extend to many sectors and industries. As such, copper is considered by some to be a leading indicator of economic performance. >But in today’s market upheaval caused by the coronavirus pandemic, these relationships may be somewhat distorted. What had happened so far is a fall in copper prices to US $4,750 per metric ton in March 2020, before rising to more than US $6,400. This mirrors the stock markets almost perfectly, with a V-shaped chart.
However, if one wants to find out what are the drivers for copper price and the general outlook in the coming decade or more, one has to identify multi-year trends that stretch long into the future. And one such trend is that of electric vehicles.
An electric vehicle is a clean alternative to conventional fuel-powered vehicles. It certainly has a different mechanism to a conventional vehicle – they do not have the same moving parts and do not need oil or fuel. As such, maintenance costs are a lot lower for an electric vehicle. The electric vehicle has a battery that stores energy and needs to be recharged from a power outlet. In general, there is also lower emissions from an electric vehicle than a conventional fuel-powered vehicle.
In the last few years, climate change and the utility of electric vehicles have been brought to the limelight. While conventional vehicles need 18 to 49 pounds of copper, battery electric vehicles need 183 pounds of copper – a factor of almost five times. Therefore, if one believes that the shift to electric vehicles is inevitable, it is not too hard to fathom that the ratio of electric vehicles to conventional vehicles will change quite drastically over the next decade. At present, the world is still used to traveling with fuel-powered vehicles. But that may change over the next few years as more vehicle manufacturers begin to produce electric vehicles. If that happens, it is quite likely that we will see a larger percentage of electric vehicles on the road and the rise in demand for copper – triggering a rise in copper prices over the next decade or two.