Copper is ‘the new oil’ and could reach $15,000 by 2025 as the world transitions to clean energy, Goldman Sachs says

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A worker inspects batches of processed copper at Mutanda Mining Sarl, Democratic Republic of the Congo

Copper will be crucial in achieving decarbonization and replacing oil with renewable energy sources, and right now, the market is facing a supply crunch that could boost the price by more than 60% in four years, Goldman Sachs said in a report on Tuesday.

Increased demand and likely low supply are set to drive up the price from the current levels of around $9,000 per ton to $15,000 per ton by 2025, the bank said.

As a cost-effective metal, copper is majorly important in the process of creating, storing and distributing clean energy from the wind, sun and geothermal sources as it has the physical attributes needed to do so, Goldman’s team of analysts, led by Jeff Currie, said in a report titled “Copper is the new oil”.

“Discussions of peak oil demand overlook the fact that without a surge in the use of copper and other key metals, the substitution of renewables for oil will not happen,’ the report said.

Copper will be needed to create the new infrastructure systems required for clean energy to replace oil and gas, however there has not been enough of a focus on this so far according to the report.

Demand will therefore significantly increase, by up to 900% to 8.7 million tons by 2030, if green technologies are adopted en masse, the bank estimates. Should this process be slower, demand will still surge to 5.4 million tons, or by almost 600%.

Copper is a key part of sustainable technologies, including electric vehicle batteries and deriving clean energy. As the deadline of the Paris Agreement comes closer, political and economic pushes towards renewable energy and green technology are becoming stronger.

Just two weeks ago, US President Biden announced an infrastructure package worth $2 trillion, which specifically encourages new sustainable technologies and infrastructure projects.

In its current state however, the copper market is not prepared for the increased demand, Goldman Sachs argue. The copper price has risen by about 80% in the last 12 months, but there hasn’t been a matching rise in output.

“The market is already tight as pandemic stimulus (particularly in China) have supported a resurgence in demand, set against stagnant supply conditions,” Goldman said.

The benchmark three-month copper futures price on the London Metal Exchange was last up 1.4% at around $9,022 a ton, while NYMEX copper futures were up 1.5% at $4.09 a pound.

As the expansion of mines and creation of new copper production fields takes years, this is likely to lead to shortages of the metal. To prevent a depletion of copper supply within two years, prices must rise now to encourage investment and an expansion in output, Goldman said.

At present, Goldman Sachs “now estimate a long-term supply gap of 8.2 million tons by 2030, twice the size of the gap that triggered the bull market in copper in the early 2000s”.

Copper production declined in 2020 due to government restrictions and lockdowns during the Covid-19 pandemic. The world’s largest copper producers, Chile and Peru, were hit especially hard by the pandemic, which could impact supply until 2023, according to commodity analysts S&P Global. Last week, prices spiked following Chilean border closures related to the pandemic.

Global copper production is however predicted to increase by 5.6% in 2021 after declining by 2.6% in 2020, according to a GlobalData report published in February.

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Tesla has partnered with a nickel mine after Elon Musk said the metal was the group’s ‘biggest concern’ amid shortage fears

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Elon Musk, the CEO of Tesla.

  • Tesla may become an adviser of a nickel mine in New Caledonia, a deal seen by Reuters showed.
  • The agreement may allow Tesla to buy nickel for its battery production amid concerns of shortages.
  • Elon Musk tweeted previously, “Nickel is our biggest concern for scaling lithium-ion cell production.”
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Tesla on Thursday agreed to partner with a nickel mine in New Caledonia in an effort to secure more of the resource, which is key in the production of lithium-ion batteries in electric cars, Reuters reported.

Tesla is expected to become an industrial adviser at the Pacific island’s Goro mine, which is owned by Brazilian mining giant Vale and is a French overseas territory.

Reuters reported that the electric-car maker is set to help with product and sustainability standards and buying nickel for its battery production, an agreement with the New Caledonian government showed.

The move comes amid growing concerns about the demand for nickel, as the acceleration of electric-vehicle production could lead to low supplies.

“Nickel is our biggest concern for scaling lithium-ion cell production,” Elon Musk, the CEO of Tesla, tweeted February 25. 

This echoed his tweet from July: “Nickel is the biggest challenge for high-volume, long-range batteries.” Musk added that nickel production in Australia, Canada, and Indonesia is going well, but in the US it’s “objectively very lame.”

There has been large unrest in the region since Vale and the French state decided to sell the nickel mine to Swiss commodity trader Trafigura in early December. This triggered strikes and protests from pro-independence groups, which forced Vale to shut down the site in the same month.

The agreement cited by Reuters showed that the new deal means a 51% stake in the Vale operations may be held by New Caledonia’s provincial authorities and other local interests. Trafigura is expected to hold a 19% stake – less than the 25% planned in the original sale agreement with Vale, the outlet reported.

Tesla won’t have a stake, just a partnership that will secure its electric-battery supply chain as it ramps up production. “Our task now is to complete any and all outstanding items to allow the transaction to formally conclude,” Vale said in an emailed statement to Reuters.

New Caledonia is the world’s fourth-largest nickel producer. The material is also mined mostly in Russia, Canada, and Indonesia.

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