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Transcript of this week's show:
We have all seen the news stories about the critical engineering inputs to electrification of the global economy. Lithium, cobalt, nickel and rare-earth elements have been studied extensively, as have the supply bottlenecks and predicted production shortages that have driven battery prices higher in electric vehicles.
Rarely discussed, however, is a critical input for not only electric vehicle batteries, but also for the entire electricity infrastructure: copper.
According to a new report by S&P Global, supply shortages of the world’s most important metallic conductor may seriously hamper the popular net zero emissions target date of 2050.
Copper is essential in the windings of electric vehicle motors, as well as in transformers and the cabling necessary to build out a nationwide electric vehicle charging infrastructure. According to the study, electric vehicles require two and a half times as much copper as an internal combustion engine vehicle. The report states that copper demand will double to 50,000,000 metric tons annually by 2035, more than all the copper consumed in the world between 1900 and 2021.
According to the International Energy Agency, copper and nickel prices have increased between 25 and 40 percent since 2021, an increase which has been in the background of much larger increases in critical battery cathode materials. Unlike storage batteries, however, there is no practical alternate technology to replace copper as an electrical conductor in mobility applications.
The availability of copper ores, however, are not the supply bottlenecks. According to the U.S. Geological Survey, global reserves are estimated at 870 million tonnes, and current annual copper demand is 28 million tonnes. Current total available copper resources are estimated to exceed 5,000 million tonnes. And while copper ores are well distributed around the world, Chile leads the globe with 27 percent of the global market share by tonnage. Peru follows with 10 percent, followed by China and the Democratic Republic of the Congo at eight percent each. The United States ranks fifth with six percent of world supply, 1,200,000 tons annually. No other nation has more than four percent of global supply.
With over one-third of copper supply controlled by two South American nations, maintaining stable pricing in a world where global supply chains are now uncertain suggests that U.S. domestic production will be a priority. To address this, last year the Biden Administration announced 2.8 billion dollars in grants to primary producers of electric vehicle minerals, including copper.
From an engineering perspective, there is another critical factor to consider in copper production: dependence on large amounts of cheap and clean electricity. Copper is electrolytically refined, from intermediates of over 99 percent purity, a purity achieved with smelting and chemical processing. This means that the refining process uses high-value and highly concentrated inputs from the smelting or leaching processes, meaning that electro-refining can take place in jurisdictions where electric power is cheap and plentiful, not necessarily in the same location where ore is mined and processed.
As green electricity technologies drop in cost, the possibility of moving the entire production process closer to the ore body is possible, but not essential. For the other commodity metals needed for EV’s, such as nickel, the basic reduction process needed to produce the metal is performed in electric furnaces with power needs on the order of dozens of megavolt-amperes, meaning a low-cost source of considerable electricity is required for refining.
Will the Biden Administration attack the problem from the mining of ores, smelting or refining? It can take a decade for new sources to come on stream, but unlike battery chemistry, there is no alternative for copper now, or in the foreseeable future.