PCNS: Copper at the heart of the world's energy transition

Copper is certainly one of the most important metals on the road to decarbonization of the world, by 2050 if we stick to the ambitions displayed by most industrialized countries, according to a policy brief from the Policy Center for the New South (PCNS).

Entitled “From the promises of the energy transition to macroeconomic gloom: copper at the crossroads”, this policy brief drawn up by Yves J├ęgourel, Senior Fellow at the PCNS, indicates that the energy transition is indeed based on four fundamental projects within which the red metal always plays an essential role.

This is, first of all, to electrify road transport, that is to say to gradually reduce the number of vehicles with internal combustion engines in favor of electric vehicles, explains the publication, noting that these are based, by definition, not only on particular technologies requiring the use of Lithium-ion (Li-ion) batteries and therefore on certain mineral resources, but also on a greater use of copper.

The energy transition implies, secondly, that the additional electricity thus generated by the end of thermal engines be supplied by renewable or low-carbon sources, thus including nuclear energy, we continue.

In this sense, the author of the note indicates that, like Li-ion batteries, their development requires specific raw materials: silicon for photovoltaic panels, rare earths or zinc (galvanization) for offshore wind turbines, in a non-exhaustive way and also requires the use of more copper mainly in the wiring (collectors and distribution), but also the generator, the power transformers, the gearbox.

With regard to supply, too rapid an analysis could suggest that the risks of tension on supply are exaggerated, considers J├ęgourel. And to explain that the reports of the International Copper Study Group (ICSG) highlight in particular that the world has, since 1960, thirty-eight years of reserves available at the rate of past and present consumption, without this figure has fundamentally changed over the years.

Due to the deposits discovered, technological progress in the extraction and processing of the ore, but also the upward trend in prices, mineral reserves have indeed grown over the past decades, thus explaining the stability of such a statistics despite the increase in consumption. Moreover, like those of many raw materials, the trajectory of copper prices responds to a multiplicity of factors, underlines the Senior Fellow, adding that the strong “environmental dependence” and the prospects for supply / demand imbalance of this metal do not seem to have been reflected in the prices of the red metal since 2020.

In this sense, the publication reveals that two factors have more particularly played on the bullish or bearish momentum of the red metal, namely the intensity of Chinese demand, intrinsically linked to the state of health of the real estate sector of this country and to the Covid pandemic and the value of the dollar which appreciated sharply from May 2021 to October 2022 under the effect of persistent inflation in the United States (as in the world) and the monetary tightening decided, as a result, by the US Federal Reserve.

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