Copper: The use of metal in electric cars has been overrated
Two companies, Goldenman Sachs and consultancy CRU Group , recently revised their forecasts for copper usage in electric vehicles (EVs). Indeed, the CRU Group predicts that between this year and 2030 the average EV will use between 51 and 56 kilograms of copper. This is a significant drop from the previous estimate of 65-66 kilograms. Similarly, Goldman Sachs projects that the amount of copper in an average EV will drop to 65 kilograms per vehicle by 2030, up from a previous estimate of 73 kilograms last year. These data are important, as electric vehicle components remain one of the main uses of copper.
Although global demand for copper remains high , miners' strikes and supply problems have severely reduced supply. Now, these new reports add a new twist to the saga. Indeed, both reports mention that the renewed focus on efficiency in electric vehicle design by Tesla and other automakers continues to reduce the amount of copper used in each car. This could have big implications for copper demand as the next generation of electric vehicles enter the market. Analysts still expect EV sales to increase in countries like China and India in the coming years. However, these advances in EV technology are seen as a limiting factor in terms of copper usage.
Previous expectations on copper use may be overstated
Copper is mainly used for electric vehicle wiring. In fact, on average, electric vehicles require four times more copper than conventional combustion engine vehicles. However, EV and battery makers continue to look for, and find, new ways to reduce weight and cost. As indicated by the two reports, these efforts have caused a decrease in the amount of copper needed for each vehicle. Some of these changes include the use of more compact batteries, thinner copper foil in the battery cells, and higher voltage systems that require less wiring.
Goldman Sachs also highlighted the potential move to higher voltage systems, such as those used by Tesla, as a significant threat to copper demand in the EV market. The investment bank expects copper demand for EVs to reach 1 million metric tons this year and 2.8 million metric tons by 2030, but some industry analysts warn that previous projections on copper demand for green energy were overly optimistic.
Meanwhile, the copper price remains quite elevated, higher than in 2018-19, but lower than the peaks of 2021-22
Some copper-producing countries face production problems
On July 10, copper prices fell on the London Metals Exchange (LME) on shocking inflation data from China. Three-month copper futures initially fell 0.1% to $8,364 a ton after a modest weekly gain. Data indicated that Chinese factories continued to face challenges in June despite little change in consumer prices and new copper jobs.
Meanwhile, Chile, the world's top copper producer, reported a 3.6 percent increase in copper exports in June this year over a year earlier. The total value of exports was $3.88 billion. Neighboring rival Peru also saw a substantial increase of almost 35% in May this year compared to 2022. Most analysts attributed this surge in production, which reached 234,781 tons, to the efforts of mining companies such as Cerro Verde, Antamina and Southern Copper, which significantly increased extraction.
However, excessive bureaucracy in Peru still poses a significant challenge for copper miners, according to a Reuters report. Indeed, Peru continues to face political instability, frequent changes of government and declining investment. Recently, this has allowed the Democratic Republic of the Congo to emerge as a formidable competitor.
This year, analysts predict a 20% drop in mining investments and this will squeeze investment in the sector. If we add the increasingly oppressive bureaucratic problems, the risk of supply compression remains
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The article Copper: the use of metal in electric cars has been overrated comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/rame-luso-del-metallo-nelle-auto-elettriche-e-stato-sopravvalutato/ on Fri, 21 Jul 2023 08:00:18 +0000.