When it comes to electric power, copper’s essential role is unmatched. From the very first flicker of electric lights, to the rise of the digital age, to the transition to new power sources and the proliferation of electric vehicles, copper remains crucial.
With its high electrical and heat conductivity, copper can be found in the vast majority of today’s transformers, electrical wiring cores and conductors, and is a key component in the construction of renewable energy sources such as wind, solar, hydro, and thermal, as well as in electric vehicles.
As most of the world seeks to reach net-zero targets and transition to cleaner, renewable forms of energy, copper is a requirement. However, the amount of copper needed to successfully facilitate the energy transition is staggering. In fact, S&P Global has stated that “projected annual shortfalls will place unprecedented strain on supply chains.” And so, the race is on to produce enough copper to meet the ever-growing demand.
This may likely mean that both copper, and the companies that extract and produce it, could provide an attractive investment opportunity for those seeking alpha in their portfolios and a way to make an impact on the realization of the greener, net-zero emissions world.
Copper has a myriad of uses, and it wouldn’t be an overstatement to say that it is one of our most important resources. Used by people for thousands of years, copper continues to be used in nearly all facets of daily life. Nearly 70% of all copper produced is used in electrical applications1, which is why it’s so important to the energy transition.
Part of the reason copper is such a great conductor of electricity is due to its high free electron concentration. When a voltage is connected across copper, it pushes the free electrons and causes them to flow through the metal, creating an electrical current.
A material with a lot of free electrons is able to carry a current more easily than one with a smaller charge density. Because there are so many electrons in copper to carry the charge, they don’t need to move very fast. This means that they are much less likely to collide with atoms or impurities in the metal.
Copper also assists with improving something called the current rating, which is the current a cable is able to carry safely without overheating.
Copper has an array of other benefits when it comes to electrification, but with regard to renewable energy, copper really is an all-star. It helps to reduce CO2 emissions by lowering the amount of energy needed to produce electricity.2 The amount of copper required for most renewable energy systems is six times that of traditional energy systems.
Copper is also a critical component in the manufacturing of electric vehicles. While the average internal combustion engine vehicle contains approximately 48 pounds of copper, a typical EV contains nearly four times that amount.3
All of these factors, and even more than we have time for here, come together to paint a bright picture for copper and its role in the clean energy transition.
It’s projected that demand for copper may increase 58% by 2040, relative to 2022.4 However, the average grade of ore mined globally from existing mines has been declining as orebodies are depleted. This means that the development of new and emerging copper mines will be needed. As a result, copper mining companies—and perhaps newer copper mining companies, in particular—may be poised for growth.
Copper has been the reliable workhorse of the metals, having already facilitated untold innovations and set the stage for the modern world we enjoy today. Now, we believe it's time for this often-underappreciated commodity to ascend even further with the clean energy transition, where it likely may be destined to remain critical for decades to come.
As governments around the world continue to invest in meeting net zero carbon emissions goals, they are starting to acknowledge how vital raw materials are to reaching these goals. The EU has already proposed classifying copper as a critical raw material5 and among Canada's 31 critical minerals, six are initially prioritized by the government for their potential clean energy impact, including copper6.
As more and more countries start to understand just how much copper is needed for electrification, there could be a push to accelerate copper mining and processing.
Copper miners may be well positioned to benefit from increased investment in the low-carbon and renewable energy sector and may offer an attractive opportunity to investors seeking access to copper through companies that are upstream in the supply chain.
Sprott Energy Transition ETFs are designed to give investors access to critical minerals such as copper, among many others, that are driving the global energy transition. To learn more, please visit the website sprottetfs.com or call 888.622.1813.
1 Source: Copper Alliance, 2023. https://copperalliance.org/resource/copper-recycling/
2 Source: Copper Alliance, 2023. https://copperalliance.org/policy-focus/climate-environment/renewable-energy
3 Source: ThinkCopper. Copper.org and Navigant Research. Global Copper Outlook 2022-2040, BloombergNEF.
5 Source:Bloomberg, March 2023. https://www.bloomberg.com/news/articles/2023-03-16/eu-proposes-designating-copper-and-nickel-as-critical-metals
6 Source: The Canadian Critical Minerals Strategy, Canada.ca, 2022. https://www.canada.ca/en/campaign/critical-minerals-in-canada/canadian-critical-minerals-strategy.html
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