A case for copper?

[rederob]

In the BHP thread ducati is presenting a case for the irrelevance of electric vehicles (EVs) and hybrid electric vehicles (HEVs) on the copper market.

EVs and HEVs are very different creatures.
EVs do not have a conventional internal combustion engine (ICE) – the electric motor substitutes for it completely.
HEVs have an electric motor and an ICE (albeit smaller as it generates electricity for the electric motor.

Using ducati’s own (10 year old) data for EVs, the substitution effect of an ICE for an electric motor adds between 9 and 16 kilograms (ducati uses 20lbs to 35lbs).

Globally there are upwards of 500 million cars on the road.
What would happen if we had to convert all of them to EVs within 20 years because fuel/oil was too expensive?

If we assumed every kilogram of copper from existing cars could be recycled then we would need at least an extra 4500 million kilograms of copper just to service this scenario.
Dividing this evenly over 20 years (for simplicity sake) means we would need 225 million kilograms of extra copper each year to make EVs. The good news is that the global stockpile of copper at LME, Shanghai and Comex warehouses is presently about 226 million kilograms (although over 10 million kilograms is already committed).
So, we can accommodate year one of the EV scenario.
What do we do in year two?
Will the global copper stockpile increase faster than it is depleted, and give us some breathing space?
Perhaps.

Unfortunately EVs are presently subservient to HEVs in the manufacturing stakes.
US consensus data suggests HEVs require twice as much copper as cars with ICEs only. (In the BHP thread ducati has not been able to discern the difference between EVs, HEVs and total copper use as wiring plus copper alloy materials. This is important as, for example, HEVs don’t just have an electric motor and ICE, they also have a generator and a converter, plus supplementary wiring unique to HEV systems.)

Toyota is the global leader in manufacture of HEVs, and since introducing its Prius in 1997 has managed to produce just over one million HEV units (inclusive of others in its HEV fleet range eg Rav 4s).
Clearly, the move to HEVs and EVs is not going to happen quickly, and converting 500 million cars over the next 20 years would be a production challenge of mammoth proportions.
But wait, there’s more.
Industry analysts reckon there could be a billion cars on the road in 20 years time. Yes, believe it or not, the challenge will not just be to convert the status quo to EV/HEVs, it’s to accommodate global growth in car ownership, especially from emerging nations.

Quickly back to the HEV calculations.
In the BHP thread I used US data.
The average US car contains over 25 kilograms (copper Development Association states 27.4kg in 2006) of copper (wiring and alloys).
HEVs are estimated to require double that amount, with lower end vehicles (with less electronic gadgetry) requiring upwards of 50% more copper than present average.
Thus, we are looking at HEVs requiring between 12 kilograms and 25 kilograms more copper per vehicle.
Going back to ducati’s EV number of 9 kilograms (or 20 lbs as he prefers), we see HEVs consuming at least 3 kilograms more – a 33% increase.

Given the present copper stockpile could barely accommodate a 9 kilogram increase per car spread evenly over 20 years, it will struggle with a further 33% increase in demand.

The above has been kept deliberately simple for demonstration purposes, but remains conceptually feasible in the longer term.

The challenge for those continuing to believe that EV/HEVs are going to be irrelevant to future copper demand/supply is to prove that the combined effects of recycling and ICE substitution are negligible.

 

[Smurf1976]

It's not just copper IMO. Once we get to the point where the petrol (as distinct from oil) supply starts to seriously fall then it's basically game over for petrol engine manufacturing. The engines we already have will need most of the available fuel. Once that happens, I'm fully expecting a late 90's internet style technology mania as car manufacturers struggle to produce a marketable product.

Trouble is, no matter which option they pursue it needs something that is in short supply. It's not just wiring - what about the materials used to make the batteries etc?

One of the reasons I don't foresee a smooth transition from oil to something else is that we'll keep having problems with not enough this, not enough that and not enough something else to actually build the alternatives.

Wind power? Great. Now about all that steel and fibreglass. And of course the diesel-powered trucks to transport the turbine blades and tower sections to the site. And the diesel-powered crane to put them up.

Hydro-electricity? Sure. And all that cement is coming from where, exactly? And if you want it built in less than a couple of decades then you'll need diesel-powered bulldozers, excavators, cranes and so on to do the job. And of course trucks to transport the cement and move the rock. Sure, it can be built without these things but it won't be quick.

Nuclear? Well that means we need more uranium and all sorts of other fancy materials that we don't exactly have huge amounts of sitting around right now.

Geothermal? That's an awful lot of new transmission lines we have to build rather quickly and an awful lot of materials needed to build them.

Sure, we have the resouces in the ground to produce cement, steel and so on but there will be a delay in getting that turned into product. And that's the problem since even once you have the product, then you have to build the turbines, reactors or whatever. In an environment where everything will need to be fast-tracked and all possible shortcuts taken anyway, I just don't see it going smoothly.

 

[YOUNG_TRADER]

Shouldn't this also increase lead consumption due to the lead requirements for the engine ie similar to lead batteries?

p.s. I was tempted to vote for the on your bike option : lol

 

[rederob]

Shouldn't this also increase lead consumption due to the lead requirements for the engine ie similar to lead batteries?

p.s. I was tempted to vote for the on your bike option : lol

EV/HEV batteries are mostly NiMH or Lithium-ion - not much lead content in an electric car.

 

[chops_a_must]

Quickly back to the HEV calculations.
In the BHP thread I used US data.
The average US car contains over 25 kilograms (copper Development Association states 27.4kg in 2006) of copper (wiring and alloys).
HEVs are estimated to require double that amount, with lower end vehicles (with less electronic gadgetry) requiring upwards of 50% more copper than present average.
Thus, we are looking at HEVs requiring between 12 kilograms and 25 kilograms more copper per vehicle.
Going back to ducati’s EV number of 9 kilograms (or 20 lbs as he prefers), we see HEVs consuming at least 3 kilograms more – a 33% increase.

Well... in my mind it's not so much the difference in materials per unit that is the issue, but the replacement cost and quantity of materials needed for the outright replacement. As technology improves, the materials needed per unit will obviously lessen, but the amount of materials needed for replacement would still be enormous.

Trouble is, no matter which option they pursue it needs something that is in short supply. It's not just wiring - what about the materials used to make the batteries etc?

I agree. Forget about copper, the biggest impact will be on a lot of the trace metals and precious metals needed for some of these high end applications.

If you are going to argue for an increase in copper demand because of this, you would also have to factor in a drop in demand for aluminium and iron for these products. Iron would no longer be needed for blocks and component parts, and aluminium would no longer be needed for heads.

 

[rederob]

As technology improves, the materials needed per unit will obviously lessen, but the amount of materials needed for replacement would still be enormous.

At the moment the opposite is true.
Increasing electric and electronic componentry in modern cars is "controlled" through copper wires. Plus, more and more (small) electric motors are creeping in to give us more and more creature comforts and functionality.
Thinner copper wires will only be available when 42volt architecture is introduced.

 

[It's Snake Pliskin]

At the moment the opposite is true.
Increasing electric and electronic componentry in modern cars is "controlled" through copper wires. Plus, more and more (small) electric motors are creeping in to give us more and more creature comforts and functionality.
Thinner copper wires will only be available when 42volt architecture is introduced.

Nice comments.
Not to mention copper piping for gas and water etc.
refridgerators air cons etc.
Unfortunately in Aus and NZ it is hard to get a perspective on the world due to the population size. Here in japan it is immense the amount of wasted machines etc that are discarded after use. What replaces them? New products and machines - especially cars.

Red,

Do you think copper could be used as an indicator or barometer of future economic growth limits? (I haven't read all the posts)

 

[rederob]

Red,
Do you think copper could be used as an indicator or barometer of future economic growth limits? (I haven't read all the posts)

Snake
Not in our lifetimes - at least not in terms of "growth limits".
Copper remains a good barometer of global industrial production, although all metals have proved cyclical and the copper barometer will fail us at some point.

Given the incredible downturn in US housing, it's surprising that copper has not dipped back into the "dollar" range. Instead it's still over 3 dollars, and not looking like falling off the perch yet.
Perhaps that's because Shanghai copper inventories dipped a few thousand tonnes this week, while LME inventories are still meandering below 200k tonnes.

I did notice that this "poll" showed a few "disbelievers", so if any would also like to post their reasons it would be appreciated.

 

[Whiskers]

Copper has pretty well held above US$3.50 for awhile and the following forcasts that we are nearing it's low and expecting to firm over the next year or two.

It says inter alia "Real growth in copper consumption remains very strong, older mines are becoming depleted and grades are declining sharply."

Assuming that the $US will recover some of it's lost ground in that time, and given the firm gold price it looks like bright times ahead for some of our juniour explorers with copper reserves with gold credits, such as GCR that I hold, who has a significant low grade copper gold deposit at copper hill.

Copper to $9,000 - upside underestimated
Copper specialists Bloomsbury Mineral Economics believe that we can expect copper prices to reach $9,000 a tonne within the next two years.

Author: Lawrence Williams
Posted: Friday , 05 Oct 2007

LONDON -

In a presentation at Mining Journal's 20:20 Copper Day in London, Chris Welch of copper specialist analytical service, Bloomsbury Mineral Economics (BME), made a strong case for copper reaching $9,000 a tonne - $4.08 a pound - by 2009. Given that BME has a great track record on copper price predictions such a prediction should not be taken lightly!

The premise behind the prediction is that the supply gap is continually underestimated by many analysts and factors which should be built into their pricing models are often excluded. Notably Welch feels that mine production is invariably over-estimated, and the figures also do not take into account the amount of copper or concentrate which is, at any given time, tied up in working stocks, and material in transit and being processed.

This effectively means that even if, for example, metal production moves into a small surplus, as is possible in 2008, the amount that is actually available to the market is somewhat less than this and helps maintains the copper price at current levels.

The stock low point is likely to occur late this year, but copper availability is still likely to be in commercial deficit through 2008 and 2009 and may achieve balance in 2010. This is the basis for the BME price prediction of $9,000 copper by the end of 2009.

This scenario - or at least the general overestimation of copper mine production by analysts - was also commented on by another speaker, Justin Longley of International Copper Resources. He showed a most interesting chart of analysts' predictions against real output which showed a huge divergence, based on figures from Xstrata.

The point perhaps that both speakers were making is that individual corporate presentations of copper mine supply are frequently heavily overestimated but many analysts may take these as reality without applying a big enough discount for projects which are cancelled, fall behind schedule or for major supply disruptions for technical, political and labour reasons. Real growth in copper consumption remains very strong, older mines are becoming depleted and grades are declining sharply.

Another interesting point which arose in Longley's presentation was the rate of copper usage per capita in the Asian sector in particular. It was pointed out that growth in Taiwan and South Korea has been very high in relation to the developed nations where the curve was lower because of the existing copper based infrastructure. But in the real growth economies like China and India, this growth pattern has hardly started yet, and should this rise to Korean or Taiwanese levels then the effect on the$ supply/demand pattern could enormous with price development which could make $9,000 copper itself a huge underestimate!

http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=37927&sn=Detail

 

[BREND]

Why I think copper price will fall:
http://basemetal-trading.blogspot.com/2007/10/copper-will-history-repeat-itself.html

I have been recommending my clients to short copper at $8260 - $8300 if it goes there again .

 

[>Apocalypto<]

Why I think copper price will fall:
http://basemetal-trading.blogspot.com/2007/10/copper-will-history-repeat-itself.html

I have been recommending my clients to short copper at $8260 - $8300 if it goes there again .

Brend your Back!

 

[BREND]

Brend your Back!

Haha, yes. Back from my army reserves training lately.

 

[BREND]

Copper has a strong resistance at $7600 - $7640, obviously somebody powerful is trying to prevent the price from going lower.

A picture means a thousand words, the chart can be found here:
http://basemetal-trading.blogspot.com/2007/10/copper-testing-support-level-again.html

I would think that base metal price will be well-supported for the next few days. Reason being:

1. yesterday China announced rise in GDP of 11.50% for the 3rd quarter, and

2. possible rate cut by the Fed next week.

 

[Whiskers]

With copper up 3.6% tonight leading a solid rise in base metals and US markets ticking along nicely this might be the turning point for copper referred to above by Bloomsbury Mineral Economics.

The stock low point is likely to occur late this year, but copper availability is still likely to be in commercial deficit through 2008 and 2009 and may achieve balance in 2010. This is the basis for the BME price prediction of $9,000 copper by the end of 2009.

 

[Dukey]

.....
Globally there are upwards of 500 million cars on the road.
What would happen if we had to convert all of them to EVs within 20 years because fuel/oil was too expensive? .....

Thnx for the interesting thread Rederob.

... Just a quick clarification for myself and possibly others - in your original post you mention 'converting' existing cars to EV's or presumably HEV's.... I guess you mean - scrapping existing vehicles and replacing then with new EV/HEV's.... is that right?

- from my limited understanding I would think there is no practical/economical way to convert an existing petrol or diesel powered vehicle to EV or HEV... ??

... though I hope I'm wrong there... as an economical means of conversion would save a lot of re-manufacturing costs.

- Also... how is the Lithium supply travelling?

-Dukey

 

[rederob]

Thnx for the interesting thread Rederob.

... Just a quick clarification for myself and possibly others - in your original post you mention 'converting' existing cars to EV's or presumably HEV's.... I guess you mean - scrapping existing vehicles and replacing then with new EV/HEV's.... is that right?

- from my limited understanding I would think there is no practical/economical way to convert an existing petrol or diesel powered vehicle to EV or HEV... ??

... though I hope I'm wrong there... as an economical means of conversion would save a lot of re-manufacturing costs.

- Also... how is the Lithium supply travelling?

-Dukey

'
Dukey
It is technically possible to keep the power train and only change the engine to electric, but that is somewhat impractical.
The full economies of ev/hev are achieved with integration of all the elements, rather than "bolt on". Also, as ev/hevs evolve, power may be driven on a per wheel basis rather than a powertrain, meaning that chassis structures and car shapes would change markedly.
As for battery (power) requirements, I guess we are in for an interesting ride, as none of the key ingredients are available on the demand level to accommodate 10million ev/hev conversions or new vehicles (within a short time-frame).
My pick would be "cobalt" as a metal play in the battery war as its other uses have already strained supply and its price is presently going gangbusters.

 

[BREND]

According to my Strategy for 2008, one of the commodities that I'm bullish about is copper. My "Strategy for 2008" can be found in my blog.

Rising copper price is going to benefit Southern Copper and Freeport McMoran. I do expect to see higher copper price after Chinese New Year.

Market simply forgotten that the biggest consumer of copper is not America, but its China. There is no evidence to prove that slowdown in US has lead to lower demand for copper in China. As a matter of fact, inventories at Shanghai Futures Exchange have fallen for eight consecutive weeks (to the lowest since February). This shows that China is lacking copper supply, and they need to buy more soon!

Last night copper jumped 5 percent to a seven- week high, leading a commodity rally, on speculation global demand for raw materials won't slacken.

Copper futures for March delivery gained 15.7 cents to $3.298 a pound at 12:16 p.m. on the Comex division of the New York Mercantile Exchange.

Earlier, copper reached $3.3165, the highest since Nov. 15. Futures rose 5.9 percent in 2007, rallying for a sixth straight year.

 

[rederob]

China is lacking copper supply, and they need to buy more soon!

Last night copper jumped 5 percent to a seven- week high, leading a commodity rally, on speculation global demand for raw materials won't slacken.

Copper futures for March delivery gained 15.7 cents to $3.298 a pound at 12:16 p.m. on the Comex division of the New York Mercantile Exchange.

Earlier, copper reached $3.3165, the highest since Nov. 15. Futures rose 5.9 percent in 2007, rallying for a sixth straight year.

LME copper warrant cancellations rose to 12% of inventory yesterday, suggesting higher prices will be sustained into the next week.
If cancellation rates increase further, $3.50 will again be hit.
Supporting base metals generally was the suspicion that Dow Jones AIG Commodity Index fund, along with a number of replica funds, was expected to start buying various baskets of LME lots.
There seems to be a surreal disconnect of metals and energy commodities from the general market which is otherwise melting down.

 

[BREND]

Yes, agreed! The next thing that will happen is falling inventory.

If copper goes lower, I will ask my customers to sell $6600 put options, today's premium is already $60/ton. If copper goes below $7000, put options may worth $80/ton, this means US$2000/lot.

 

[ithatheekret]

Even if things tank , goods still have to be made and the amount of copper that's used for coils and alternators etc. is eye boggling .

It's a bit like zero growth , there's still growth at zero . Sustainable is a point of conclusion in my books , that's the bottom line for copper , speculation is both the hammer and the rocket fuel .

Whoever put upthe EV HEV vote is onto something though , very much in the future , but well onto something .

What system do UAV's use ? There all the go with the military and that's a big dollar .