Electric cars will drive increased global demand for copper

Copper is the metal of the future as demand for electric cars takes of, BHP believes.

BHP’s Olympic Dam copper mine in South Australia.

This year represents the “tipping point” in an electric vehicle revolution that will drive global demand for copper, BHP Billiton believes.

Arnoud Balhuizen, chief commercial officer at the global miner, declared “copper is the metal of the future.”

“In September 2016 we published a blog and we set the question: could 2017 be the year of the electric vehicle revolution? The answer is yes, 2017 is the revolution year we have been speaking about.”

A succession of leading carmakers have pledged recently to electrify their ranges, while countries including Britain and France have vowed to ban the sale of new petrol and diesel vehicles by 2040.

Although, unlike some of its rivals, BHP does not have exposure to key battery materials such as zinc, lithium and cobalt, it argues the biggest impact from the growth of electric cars will be on copper. Such vehicles require four times as much copper as their conventional peers.

Copper prices rallied by a fifth over the winter amid an expectation of increasing demand for the metal. That, in turn, has been linked with forecasts of electric vehicle growth. Copper prices hit three-year highs at the start of September before falling back.

BHP forecasts that a dearth of significant copper discoveries in recent years and natural decline at leading mines will ensure that demand outstrips supply, pushing up prices.

The company has identified copper as one if its key priorities and last month sanctioned a $2.5 billion project to expand its Spencer copper mine in Chile. Its other key copper mines include Olympic Dam, as well as Escondida in Chile.

BHP said there could be 140 million electric vehicles on the road by 2035, which it describes as being at “the greener” end of the spectrum. “The reality is a mid-sized electric vehicle still needs subsidies to compete ... so a lot will depend on batteries, on policy, on infrastructure,” Mr Balhuizen said. The forecast is slightly more bullish than that of BP, the oil major, which predicts 100 million electric vehicles by 2035, up from about 500,000 today but still only a small fraction of the total number of cars on the road, which it projects will double to 2 billion.

Both forecasts are below the trajectory implied by Bloomberg New Energy Finance, which forecasts 530 million electric vehicles on the road by 2040. It argues both the lifetime and the upfront costs of electric vehicles will fall below those of conventional combustion engine vehicle in the 2020s.

Mr Balhuizen called China’s Silk Road trade route to Europe as a “tremendous opportunity” and a key factor for commodities markets. He said it could create demand for a further 150 million tonnes of steel.

The Times