External factors to consider!
Why, How, and What to Expect – all you need to know about Copper in 2019
The dawn of 2019 is upon us, and economic turmoil, international cooperation, tariffs, export regulations, conflicts, and Brexit are affecting the market and demand for natural resources as copper. These challenges—combined with a stringent and continuous paradigm shift from the combustion engine to electric and hybrid energy systems—indicate that the copper price for 2019 will be stable compared to 2018. In this month’s column, I will address the expected demand and supply of copper after 2019, and particularly in one key industry—automotive.
The Copper Situation
This industry is rapidly starting to affect the demand for copper, not least in the years to come. The key characteristics of copper are its electrical and thermal properties—tough, recyclable, non-magnetic, antimicrobial, and catalytic—and its status as an affordable resource compared to materials with similar attributes. Thus, copper a vital resource for current and future industries like power, medical, automotive and renewable energy. What these industries have in common is not only a significant demand for copper but also a high demand for PCBs. Copper is one of the key raw materials in PCB manufacturing and is consequently price sensitive to changes in copper demand and supply. Manufacturers, customers, organizations, and governments are constantly aligning their interest in the automotive industry as the demand for electric and hybrid energy systems increases.
Copper Demand, Development and Supply
One research paper shares estimates for global copper demand until 2100 (Figure 1) . Their findings indicate that infrastructure and transportation represent future significant sectors for increased copper demand. The automotive industry is already directly affecting these sectors. In most cases, electric vehicles require extensive upgrades of the local and central power distribution network (PDN) to allow users access to an efficient and fast charging apparatus. An estimated 85% of all copper mined is still in circulation because the resource is highly recyclable. Unfortunately, this recyclable attribute is not properly addressed in many papers, which constitutes a challenge in regard to better estimating future supply and demand.
Figure 1: Global copper demand estimates .
Copper supply is estimated by Wood Mackenzie to grow until approximately 2020 (Figure 2). Then, the demand will outstrip supply unless the global market experiences increased turmoil as mentioned earlier. This leads us to draw the preliminary finding that the price of copper for the short term of 2019 will be stable; for the medium term from 2020–2023, it will increase, and in the long term of 2035, the demand will grow with over 50%. It is important to state that it is a challenge to estimate the future demand for copper because copper estimates from ScienceDirect and Bloomberg differ from a yearly demand in 2025 from 35 to 24 million tons.
Figure 2: Mined copper supply gap and requirement for new capacity. Within three years, new supply will be required to match growing demand. (Source: Wood Mackenzie)
Challenges for the Automotive Industry
The automotive industry is experiencing a challenging setting as governments all over the world are placing a ban on the new sales of combustion engines. Over 15 countries representing over 1.5 billion people have officially stated that the gasoline and diesel engine for new car sales will be banned. The country to first implement a ban on new car sales with gasoline or diesel is Costa Rica by 2021, and the latest is Germany with 2050. The median is around 2030, so this will not occur overnight. However, it leads us to estimate that the sale of electric cars will increase substantially within only a couple of years.
The increase in the sale of electric vehicles will depend on the battery package, increase the demand for copper per car from typically nine to 25 and even 90 Kg . One can assume that the quality, efficiency, and amount of batteries will continue to increase, which will lead to a further demand for copper per car. As an example, a luxury car has an average of two to three square meters of PCBs, and an electric vehicle has five to eight square meters of PCBs . The PCBs for electric cars are also more advanced and costly because the car is practically a computer on wheels.
Batteries vs. PCBs: Competing Copper Resources
The copper foil used in batteries is more or less a direct competitor to the copper foil used for PCBs. An increase in the demand for electric vehicles will therefore directly affect the copper foil price for PCBs. Rather, the question is, “How much and how fast will the demand for electric vehicles increase, and what is the consequence for the battery supply?” In relation to BMW, one article states, “They are especially worried about the battery pack” . Volkswagen alone has a battery contract for over $48 billion USD . Over 30 different types of electric cars with different battery packages are planned to be on the road by 2025, which is likely to be an understatement .
The international energy agency estimates a growth from a total current sale of electric cars of three million from 1900 to 2018 to a total sale of over 125 million by 2025 . The total number of cars sold in 2018 was approximately 80 million . Bloomberg estimates a yearly sale of 11 million electric vehicles by 2025 . If these presumptions are correct, then the effect on copper foil demand (not including upgrading PDNs, charging stations, critical infrastructure for electric vehicles, etc.) can be estimated to be 803,000 tons of copper per year . This constitutes growth in the demand for copper per year from 2025 by approximately 2.7% .
Now is the time to start planning. The automotive industry will not shift overnight. The production line takes time to adjust, and new copper mines, technologies, and projects will improve the supply of copper. The question is perhaps, “How should you prepare if the adoption of electric cars is faster than anticipated, let alone considering tax cuts, environmental considerations, and customer demands?”
- Schipper, B. W., Lin, H.C., Meloni, M.A., Wansleeben, K., Heijungs, R., & van der Voet, E. “Estimating global copper demand until 2100 with regression and stock dynamics,” Resources, Conservation and Recycling, Volume 132, May 2018, pp. 28–36.
- Copper Development Association (CDA) Inc. “Copper Drives Electric Vehicles.”
- Eikei Group. “PCB Market Increment Driven by New-energy Vehicles in Vogue,” March 30, 2018.
- Lambert, F. “BMW invests over $225 million to bring new i4 electric car to production,” Electrek, December 12, 2018.
- Lambert, F. “VW doubles its electric vehicle battery contracts to $48 billion,” Electrek, May 4, 2018.
- Matousek, M. “30 electric cars you’ll see on the road by 2025,” Business Insider Nordic, August 23, 2018.
- DiChristopher, T. “Electric vehicles will grow from 3 million to 125 million by 2030, International Energy Agency forecasts,” CNBC, May 30, 2018.
- Statista. “Number of cars sold worldwide from 1990 to 2018 (in million units),” October, 2018.
- Bloomberg. “Electric Vehicle Outlook 2018.”
- Calculation: 90-kg copper electric car – 17-kg combustion car ((9 + 25) / 2) * 11 million cars)
- Calculation: 2.7% (803,000/30,000,000 (30 million (35 million + 25 million) / 2))
This article was first published in our column, The PCB Norsemen in the PCB Magazine.
To read past columns, click here.