EV Copper Use to Rise, How Australia Can Help Fill Demand

Copper's key role in electric vehicles

As mentioned, battery metals like lithium and cobalt are more commonly in the spotlight when it comes to the EV story. But copper has a key role that is only gaining more attention as time goes by.

According to Wood Mackenzie, EVs can use up to three and a half times as much copper as ICE passenger cars. Battery-powered buses, a key aspect of public transportation, are even more copper intensive, using between 11 and 16 times more copper than similar ICE passenger vehicles, depending on the size of the battery and the bus.

Due to its superior conductivity, EVs coming off assembly lines today rely on extensive copper wiring to connect their battery packs to vehicle electronics, while their batteries contain 8 percent copper on average.

What's more, it's estimated that eight times more lithium, nickel and copper will be required for annual EV production in 2030 compared to today — and that is a low forecast assuming only 40 percent EV sales penetration.

Notably, Morgan Stanley (NYSE:MS) has argued that copper is "the new oil" in recognition of how the metal has become an integral component of sustainable technologies as part of a "new industrial order," particularly with respect to EVs and other industrial sectors that rely on clean energy.

Meanwhile, in a May 2021 report, investment bank Goldman Sachs (NYSE:GS) states that "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 percent in four years." In addition, the firm predicts that by 2030, copper demand will grow nearly 600 percent to 5.4 million tonnes.

Does this mean that there will be a copper crunch between now and then?

"There is a question mark over whether miners can deliver enough supply for all applications of copper," Eleni Joannides, research director for copper at Wood Mackenzie, explained to the Investing News Network. "If you just consider EVs alone, in most of the world outside China, the extra demand for copper foil for EV batteries will be supplied by scrap. In China, it will be a mix of scrap and refined copper. Even under the most optimistic scenarios, EVs will represent only a small part of total copper demand."

Joannides does not believe that the world's leading EV manufacturers will face a battery shortage owing to a shortfall in copper supply. "It is unlikely that copper in and of itself will threaten battery production given all the other commodities required which have their own supply/demand dynamics. In the meantime, the copper foil industry is making good progress in announcing and building new projects and expansions across the globe."

That said, in the wake of Russia's invasion of Ukraine, along with a projected sustained period of higher oil prices, consumers may shift in even greater proportions away from ICE vehicles and toward EVs. Should prices for copper and the other metals required for battery production continue to soar as they have in recent months, battery manufacturers may pass the costs along to EV manufacturers — their sales figures could be blunted by consequent higher sticker price costs.

Joannides thinks copper will likely rise beyond the three to five year horizon. "This will have to be reflected in battery prices, and this may well affect the profitability of EV battery manufacturers. This could lead to difficulties in the market if EV battery prices become so expensive that EV makers are not prepared to pay for it," she said.

How Australia's copper sector can help feed EVs

Rising prices may have the effect of incentivising Australian copper producers to increase exploration, expand capacity and otherwise increase production down the road to meet expected demand for the metal.

According to the most recent data provided by the US Geological Survey, Australian copper reserves are the second highest in the world as of 2021 at 93 million tonnes, behind Chile with 200 million tonnes. Australia is also a top 10 copper producer, and exports generated revenues of US$3.82 billion in 2021; industry analysts expect that figure to continue to rise for the rest of the decade and beyond.

The majority of the country's copper resources are concentrated at the Olympic Dam copper-uranium-gold deposit in South Australia and at the Mount Isa copper-lead-zinc deposit in Queensland.

Other significant Australian copper sources are the Northparkes copper-gold, CSA copper-lead-zinc and Girilambone copper deposits in New South Wales; the Ernest Henry, Osborne and Mammoth copper and copper-gold deposits at Selwyn in Queensland; the copper-zinc deposits at Golden Grove in Western Australia; and the Nifty copper deposit, also located in Western Australia.

For more details on copper in Australia, click through the links below:

• Copper in Australia
• Copper Mines in Australia
• Copper Stocks in South Australia
• Copper Stocks in Western Australia
• Copper Stocks in Queensland
• Copper Stocks in New South Wales