(Kitco News) - The amount of copper required for electrification purposes over the next three decades is astronomical, says Matt Watson, founder of Precious Metals Commodity Management LLC.
On April 10, Watson recorded an episode of Green Rush with guest Bart Melek, global head of commodity strategy at TD Securities. The topic was copper, the electrification metal.
Watson pulled up a chart showing the total demand for copper — the most highly conductive metal besides silver. In a base case emissions scenario, copper demand will rise to over 50 million tonnes a year by 2050. For context, humankind has mined 620 million tonnes of copper to date, and the mining industry currently produces about 22 million tonnes a year.
"You're gonna have to mine roughly 2X what we've mined historically in the next three decades," said Watson. "That's just a staggering thought."
"It is a big number, and it's going to require massive amounts of capex," Melek agreed.
Watson showed charts requiring greater amounts of copper usage in electric vehicles and renewable energy systems, especially wind power and solar. Seventy-five percent of copper demand comes from wiring.
"The transition into a net zero economy, electrification of the global economy cannot happen without metals like copper," said Melek.
"Nearly 50 percent of the global known reserves of copper today will be allocated just to those kinds of renewable and clean energy transition topics, so it's a metal that to me feels like it can only be stressed further going ahead," Watson added.
Melek said even more copper will be demanded by artificial intelligence, smart grids, and renewable energy storage.
Each agreed copper is a more stable market than, say, lithium, whose price has been volatile.
"The need for this electrification metal is it perseveres no matter what the macroeconomic conditions look like," said Watson.
Asked for his outlook on copper this year, Melek pointed to positive demand factors such as a pickup in Chinese economic growth and the lack of recession in the United States. On the supply side, there was the closure of the Cobre Panama copper mine last year, among other mine supply interruptions.
"We could have the recovery in demand for things like copper and other metals materialize much quicker than I think anybody thought, and you add the supply side to it and we're looking at deficits anywhere from 300 to half a million tonnes this year," he said.
Listen to Kitco Mining's Green Rush to understand and profit from a once-in-a-century event: the clean energy transition. Each week, host Matt Watson, founder of Precious Metals Commodity Management, will take a deep dive into a metal that will underpin our new electrified world. Green Rush explores the vital role of nickel, copper, lithium, cobalt, silver, platinum group metals, rare earth elements and other metals that power the batteries driving our sustainable future.