Over the past few weeks, copper prices have seen a significant surge including reaching record-high levels. This sharp increase could have substantial implications on industries, such as that of EVs and batteries, reliant on copper. Driven by a combination of factors including a limited supply of copper, the rising demand and the West’s strategic interest in controlling its copper supply, how will this impact battery and EV manufacturers?
The Price of Copper
As of June 2024, copper prices have been hovering around $4.50 per pound, marking a significant increase from just four months back when prices were around $3.68. Having reached a high of $5.11 in May 2024, this price is the highest copper has ever reached and marks an increase of almost 40% since its more usual $3.68. Furthermore, the price of copper has almost quadrupled over the past two decades, going from under $1 per pound in 2000 to over $4 in early 2023.
A Limited Supply
With a constrained supply of copper contributing to the recent spike of copper prices, several disruptions in the supply chain have contributed to this recent rise. Indeed, closures of copper mines including that of the Cobre Panama mine, a significant global copper source, has shifted market expectations from surplus to deficit. Additionally, Chinese smelters, which process more than half of the world’s copper, have agreed to reduce production by 5-10% due to a shortage of copper concentrate, further tightening supply.
In terms of environmental issues, declining ore grades and environmental concerns have made new mining projects more challenging and expensive to initiate. For instance, production issues in major mining regions like the Democratic Republic of Congo and Zambia have exacerbated supply constraints.
Furthermore, investment in new copper mining projects has not kept pace with the growing demand. According to Goldman Sachs, mining investments in 2022 were nearly 50% lower than the expenditure in 2010, indicating a significant slowdown in expanding mining capacity, which could result in a widening deficit in copper supply from 2024 onwards.
Rising Demand
Copper Mining
Due to copper’s essential role in the green energy transition and industries stepping away from fossil fuels, its demand is surging. By the early 2030s, this demand is expected to exceed supply by more than 6 million tonnes annually, with copper consumption rising from 25 million metric tons in 2021 to 39 million metric tons by 2040. However, current mining rates will only see a 16% increase in primary copper production by 2040, far below the needed 56%, indicating a substantial shortfall. While recycled copper currently bridges some of the supply gap, new mines and improved recycling are essential to prevent severe copper shortages by 2040.
Copper in EVs
The expansion of EVs combined with electrification is set to drive copper demand significantly over the next two decades, with the transport sector expected to surpass construction as the largest copper user by the 2030s. Indeed, copper’s critical role in energy transition stems from its excellent electrical and thermal conductivity. Currently, copper constitutes up to 12% of EV batteries, making it a major component. The rising cost of copper could increase battery prices, impacting manufacturers’ margins or leading to higher EV prices. In response, battery makers are seeking ways to reduce copper usage. Global EV sales, which hit 6.6 million in 2021, are projected to reach 139 million by 2040. With each EV requiring about 83 kg of copper, 3.7 times more than traditional cars, this growing demand is likely to strain copper supply, potentially causing shortages and further price increases.
Keeping Control of Copper
In terms of who controls copper supplies, there’s a geopolitical dimension, particularly from Western countries aiming to secure their access to this crucial resource. Indeed, with Western nations increasingly aware of the strategic importance of copper, this has led to a focus on securing supply chains through investments and international alliances. As a result, the US and European countries are looking to diversify their sources of copper away from reliance on China, whose copper smelters process more than half of the world’s supplies.
Moreover, these countries are seeking to invest in mining companies to prevent Chinese control and the tightening of its grip over the global supply of crucial metals and minerals. For instance, after one of the world’s largest copper producers faced financial difficulties, the Biden administration began discussions with potential investors about acquiring a stake in the company’s Zambian mines, which could be valued up to $3 billion.
Reducing Copper Usage in EVs with Addionics
At the same time as the global rush to acquire more copper proceeds, finding ways to reduce the amount of copper needed is at the forefront of battery and automakers’ minds. While copper is currently one of the most expensive components of EV batteries, Addionics’ 3D Current Collectors reduce the amount of copper in batteries by up to 60%, creating high-performing batteries that utilise up to 100% recycled copper. Consequently, there can be less anxiety about securing such large quantities of copper, easing supply chain pressures. Simultaneously, by using less copper, the overall cost of batteries and, consequently, EVs is lowered, leading to them being more affordable and promoting their adoption.
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