Alternative Energy And European Factory Data Bode Well For Copper - Forbes

Here’s a bit of energizing news: In 2014, for the first time in four decades, the global economy grew along with energy demand without an increase in global carbon emissions.

That’s according to energy policy group REN21’s just-released Renewables 2015 Global Status Report, which attributes this stabilization to “increased penetration of renewable energy and to improvements in energy efficiency.”

What this means is that as the world’s population continues to grow, and as more people in developing and emerging countries gain access to electricity, the role alternative energy sources such as wind, solar and geothermal play should skyrocket. Between now and 2040, a massive $8 trillion will be spent globally on renewables, about two thirds of all energy spending, according to Bloomberg New Energy Finance. Solar power alone is expected to draw $3.7 trillion.

This is good news indeed for copper, necessary for the conduction of electricity in all energy technologies, whether they be traditional or alternative. The use of some carbon-emitting fossil fuelsâ€"coal, for instanceâ€"will likely drop off over the years, but copper will remain an irreplaceable component in our ever-expanding energy needs.

Global copper consumption is poised to increase not just because electricity demand is growing. New energy technologies typically require more of the red metal than traditional sources. Each megawatt of wind power capacity, for instance, uses an average of 3.6 tonnes of copper. Electric trolleys, buses and subway cars use about 2,300 pounds of copper apiece. Where we’ll see the most significant growth, though, is in the production of hybrid and electric cars, which use two to three times more copper than internal combustion engines.

Leading the way in electric vehicle technologies, of course, is billionaire entrepreneur Elon Musk’s Tesla Motors, whose $5-billion Gigafactory is currently under construction in Reno, Nevada. When production begins on its lithium-ion batteries, it will consume biblical amounts of base metals and other raw materialsâ€"so much, in fact, that some analysts question whether world supply can meet demand.

Besides needing a constant stream of lithium and nickel, the factory will consume a staggering 17 million tonnes of copper, 7,000 tonnes of cobalt (today, worldwide supply is 110,000 tonnes), 25,000 tonnes of lithium (about a fifth of worldwide supply), and 126,000 tonnes of raw graphite (a little over a third of global supply). To keep up with such demand, nine new graphite mines will reportedly need to be opened. This should come as welcome news for industry-leading base metals mining companies Freeport-McMoRan, Rio Tinto, Lundin Mining and Glencore.

To be sure, copper and other base metals face some strong headwinds right now, not least of which is the strong U.S. dollar. As you can see, the red metal and the greenback have an inverse relationship.

The Thomson Reuters GFMS Survey estimates that the incentive price for new copper production is $3.50 per pound, a level unseen since March 2013. Although global copper mine production increased around 1.5 percent year-over-year in the first quarter of 2015, we might see a copper supply deficit in the next 10 years.