Summary of a must read article below (my bold for emphasis):
“One of the biggest, most important, most lucrative trends of the next 20 years will be the rise of green energy… and the concurrent decline in fossil fuel consumption.
Copper is a vital building ingredient in nearly everything around you. It’s used for wiring and plumbing in houses. It’s used in cars, infrastructure projects, and appliances. It’s a major component of power lines and electric motors.
Copper has rallied off its 2015 lows. I believe this rally will turn into a long period of rising copper prices.
Copper Price Catalysts: 1. Electric Vehicles (EVs).
I believe this sector will enjoy tremendous growth over the next 20 years. EVs are a major part of reducing carbon emissions around the world.
Electric vehicles require three times more copper than conventional vehicles with international combustion engines. On average, an internal combustion engine uses 55 pounds of copper. A hybrid uses about 110 pounds and an EV uses 165 pounds of copper.
Over the last five years, EV sales have grown at a compounded growth rate of 32% annually.
The consensus from independent analysts, including the brain trust at Bloomberg, is that by 2030 the adoption of EVs in the U.S. will be 34%. Conservatively, the U.S. automobile sector in 2030 alone will consume 1.1 billion pounds of copper… using my conservative metric, will increase U.S. annual copper consumption by just under 9%
China is the world’s largest vehicle market. The Chinese government is planning for 4% EV adoption by 2021, which would mean 1.12 million EVs will be sold in China in less than five years. China has stated it wants 7 million EVs (or 20% of the 35 million vehicle market) by 2025. That means the total consumption of copper in the Chinese vehicle market will be 2.1 billion pounds, of which 700 million pounds will be just EVs.
2. Infrastructure projects
The amount of “plug in” infrastructure that will be required to meet EV demand. All those EVs need special charging stations.
3. Smart Homes
Smart homes use over twice as much copper than a traditional home. Installing the solar roofs, and all the other features that include the electrification of a smart home will double the use of copper in a house.
Based on a conservative scenario, it is expected that new EV demand globally will increase copper demand over the next 25 years by 1.25% annually. Combine that with the existing 3.34% historical average, and there could be a scenario that the growth rate of copper reaches over 4.5% annually over the next 25 years.
I believe the above scenario will take copper to $5 per pound by 2020.
