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Are Copper Prices in a Supercycle? A 120-Year Perspective

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Are Copper Prices in a Supercycle

Are Copper Prices in a Supercycle? A 120-Year Perspective

There are multiple factors that could fuel the price of copper to record highs, including the global recovery from the COVID-19 pandemic, the U.S. trillion-dollar stimulus package, and the ongoing energy transition.

As a result of this, some global banks are predicting a supercycle for the metal, i.e., a sustained spell of abnormally strong demand growth that producers struggle to match, sparking a rally in prices that can last decades.

To put the current trend into perspective, the above graphic uses data from the U.S. Federal Reserve and consultancy Roskill to picture copper’s previous rallies over the last 120 years.

Historic EventsPrice In USD/Tonne
1914 - World War I$11,648
1930 - Great Depression$4,690
1942 - World War II$3,514
1973 - Oil Crisis$9,196
1997 - Asian Crisis $2,420
2008 - Financial Crisis$11,000
2020 - COVID-19$4,700

The Rise of a Super Power: U.S. Supercycle

Industrialization and urbanization in the United States sparked the first supercycle of the 20th century. Machines replaced hand labor as the main means of manufacturing and people moved to cities in record numbers. Immigration and natural growth caused the U.S. population to rise from 40 million in 1870 to 100 million in 1916.

“What’s right about America is that although we have a mess of problems, we have great capacity – intellect and resources – to do some thing about them.” – Henry Ford II

The value of goods produced in the U.S. increased almost tenfold between 1870 and 1916. The cycle was succeeded by the Great Depression, with a sharp decline in world consumption that brought the copper price to the lowest since 1894 ($4,690 per tonne).

Pax Americana: The Post-War Copper Supercycle

During WWII, the U.S. government considered copper a critical metal to the military. In order to conserve copper supply, the use of copper in building construction was prohibited, specific products with copper were limited to 60% of its previous war usage, and the War Production Board allocated supply to specific manufacturers.

At the center of global copper markets, the London Metals Exchange fixed the price of copper at £56/tonne ($3,514 per tonne, adjusted to 2021 inflation) during the war and the government issued permits to control purchases. The official price would rise after the war due to increased demand from reconstruction and the rise of the automobile, but price controls were not lifted until 1953.

The United States, Soviet Union, Western European, and East Asian countries experienced unusual growth after World War II. The reconstruction of Europe and Japan powered the commodities market and despite the scale of material damage, industrial equipment and plants survived the war remarkably intact.

“I was very lucky, I was part of the post-war period when everything had to be redone.” – Pierre Cardin

The outbreak of the Korean War in 1950 further strengthened demand as countries commenced strategic stockpiling programs. In January 1951, the US government imposed a ceiling price of 24.6¢/lb on domestic copper which remained in place until the end of 1952. Price controls held U.S. domestic prices lower than world prices, creating shortages.

According to assets managing firm Winton, U.S. prices remained lower after the release of these controls, as producers sought to prevent the substitution of copper wiring with cheaper materials such as aluminum. This two-tier market – producer prices for U.S. consumers and LME prices for everyone else – was in place until 1970.

The Pax Americana spanned from the end of the Second World War in 1945 to the early 1970s, when the collapse of the Bretton Woods monetary system and the 1973 oil crisis caused high unemployment and high inflation in most of the Western world. Prices jumped to $9,196 per tonne in 1973.

The Four Tigers and The Rise of China: Asian Supercycles

The massive growth of East Asia nations drove the next two supercycles of the century: (1983-1994) and the 2000s commodities boom (2002-2014).

Specifically, Japan played a central role in the third supercycle of the century. The country achieved record economic growth, averaging 10% a year until the seventies. Its economy grew from one less productive than Italy to the third-largest in the world, behind only the United States and the Soviet Union. Growth was especially strong in heavy industry and in advanced technology.

The most recent cycle started in 2002 after China joined the World Trade Organization (WTO) and started to modernize its economy. The country entered a phase of roaring economic growth, fueled by a rollout of infrastructure and cities on an unprecedented scale. Copper price reached $9,000 per tonne in May 2006, pressured by strong Chinese demand.

Are Copper Prices in a Supercycle?

Previous copper rallies reveal a pattern of broad-based growth, industrialization, and new technologies can help drive the demand and prices. Is the global economy entering such a phase?

As world economies emerge from the COVID-19 pandemic and decarbonization is top-of-mind in many countries, copper is set to play a key role as an electrical conductor. Electric and hybrid cars use more copper than regular gasoline vehicles – 165lbs, 110lbs and 55lbs respectively. Renewables also demand more copper: A single wind farm can contain between 4 million and 15 million pounds of metal.

The copper price hit a record high in May 2021 ($10,476 a tonne) and trading house Trafigura Group, Goldman Sachs, and Bank of America expect the metal to extend its recent gains. Whether it will be enough for a new supercycle is yet to be seen.

Hindsight is 20/20 but the future looks electric.

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Electrification

The World’s Largest Nickel Mining Companies

Nickel has emerged as an important battery metal, and these ten nickel mining companies are producing the nickel needed for EV batteries.

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The World’s Top 10 Nickel Mining Companies

As the world transitions towards electric vehicles and cleaner energy sources, nickel has emerged as an essential metal for this green revolution.

Needed for the manufacturing of electric vehicles, wind turbines, and nuclear power plants, nickel is also primarily used to make stainless steel alloys more resistant to corrosion and extreme temperatures.

Using data from Mining Intelligence, this graphic shows the top 10 companies by nickel production along with their market cap.

The Biggest Nickel Miners by Production in 2020

Nickel has long been an important mineral for batteries, plating, and steelmaking, but it was only recently added to the USGS’s proposed critical minerals list.

As countries and industries realize the importance of nickel for the development of sustainable technologies, nickel mining companies will be at the forefront of supplying the world with the nickel it needs.

The 850 kt of nickel mined by the top 10 nickel mining companies is worth around $17.3B, with both production and price expected to grow alongside nickel demand.

CompanyMarket CapProduction
Nornickel$48B236.0 kt
Vale$59B214.7 kt
Glencore$64B110.2 kt
BHP$134B80.0 kt
Anglo American$50B44.0 kt
South32$12B41.0 kt
Eramet$2B36.0 kt
IGO$5B30.0 kt
Terrafamen/a29.0 kt
MCC$5B29.0 kt

Source: Miningintelligence.com, Yahoo Finance

Nickel and palladium miner and smelter Nornickel leads the list with 236 kt of nickel produced in 2020, the majority coming from its Norilsk division of flagship assets in Russia.

With 46% of Nornickel’s energy mix sourced from renewable power, the company is pushing the development of carbon neutral nickel, starting with reducing carbon dioxide emissions by 60,000-70,000 tons in 2022.

Vale follows closely behind in production and in its carbon footprint goals. The Brazil-based company’s Long Harbour processing plant in Newfoundland and Labrador produces nickel with a carbon footprint about a third of the industry average–4.4 tonnes of CO2 equivalent per tonne of nickel compared to Nickel Institute’s average of 13 tonnes of CO2 equivalent.

With the top two companies producing more than half of the nickel produced by the top 10 miners, their efforts in decarbonization will pave the way for the nickel mining industry.

The Need for Nickel in the Energy Transition

Alongside the decarbonization of the nickel mining process, nickel itself powers many of the technologies crucial to the energy transition. Vehicle electrification is highly dependent on nickel, with a single electric car requiring more than 87 pounds of nickel, making up almost 1/5th of all the metals required.

With a history of being used in nickel cadmium and nickel metal hydride batteries, nickel is now being increasingly used in lithium-ion batteries for its greater energy density and lower cost compared to cobalt. Alongside the increase in usage, not all nickel is suitable for lithium-ion battery production, as batteries require the rarer form of the metal’s deposits known as nickel sulphides.

The more common form of the metal, nickel laterites, are still useful in forming the alloys that make up the frames and various gears of wind turbines.

Nickel is also essential to nuclear power plants, making up nearly a quarter of the metals needed per megawatt generated.

The Future of Nickel Mining and Processing

With nickel in such high demand for batteries and cleaner energy infrastructure, it’s no wonder that global nickel demand is expected to outweigh supply by 2024. The scarcity of high grade nickel sulphide deposits and the carbon intensity to mine them has also incentivized the exploration of new methods of harvesting the metal.

Agro-mining uses plants known as hyperaccumulators to absorb metals found in the soil through their roots, resulting in their leaves containing up to 4% nickel in dry weight. These plants are then harvested and incinerated, with their ash processed to recover the nickel “bio-ore”.

Along with providing us with metals like nickel, lead, and cobalt through a less energy intensive process, agro-mining also helps decontaminate polluted soil.

While new processes like agro-mining won’t replace traditional mining, they’ll be a helpful step forward in closing the future nickel supply gap while helping reduce the carbon footprint of the nickel processing industry.

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Electrification

Visualizing the Natural Graphite Supply Problem

In 2020, China produced 59% of natural graphite and over 80% of battery anode material. Here’s a look at the graphite supply problem.

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natural graphite

Visualizing the Natural Graphite Supply Problem

Graphite is a critical mineral for lithium-ion batteries, and its battery demand is expected to grow ten-fold by 2030.

Meeting this increasing demand will require a higher supply of both natural graphite and its synthetic counterpart. However, graphite’s entire supply chain is heavily reliant on China, which makes it vulnerable to disruptions while creating environmental challenges.

This infographic from our sponsor Northern Graphite highlights China’s stronghold over the graphite supply chain and outlines the need for new natural graphite mines.

China’s Dominance in the Graphite Supply Chain

From mining natural graphite to manufacturing battery anodes, China dominates every stage of the graphite supply chain.

For example, in 2020, 59% of global natural graphite production came from China. Mozambique, the second-largest producer, churned out 120,000 tonnes—just one-fifth of Chinese production.

Country2020E production, tonnes% of total
China 🇨🇳650,00059.1%
Mozambique 🇲🇿120,00010.9%
Brazil 🇧🇷95,0008.6%
Madagascar 🇲🇬47,0004.3%
India 🇮🇳34,0003.1%
Russia 🇷🇺24,0002.2%
Ukraine 🇺🇦19,0001.7%
Norway 🇳🇴15,0001.4%
Pakistan 🇵🇰13,0001.2%
Canada 🇨🇦10,0000.9%
Rest of the World 🌎73,0006.6%
Total1,100,000100%

China’s massive output makes the other top nine countries look substantially smaller in terms of natural graphite production. Moreover, China also dominates the manufacturing of synthetic graphite and the conversion of graphite into anode material for batteries.

In 2018, China produced nearly 80% of all synthetic graphite, and in 2019, it was responsible for 86% of all battery anode material production. This dependence on graphite supply from China puts the supply chain at risk of political disruptions and makes it unsustainable for the long term.

Unsustainable Production: Natural Graphite vs Synthetic Graphite

The carbon footprint of manufacturing partly depends on the source of energy used in production.

Coal dominates China’s energy mix with a 58% share, followed by petroleum and other liquids. This increases the carbon footprint of all production and especially that of synthetic graphite, which involves energy-intensive heat treatment of petroleum coke.

Energy sourceType% of China's energy consumption (2019)
Coal Fossil fuel58%
Petroleum and other liquidsFossil fuel20%
Hydro Renewable8%
Natural gasFossil fuel8%
Other renewablesRenewable5%
NuclearNon-renewable2%
TotalN/A100%

Percentages may not add to 100% due to rounding.

One study found that producing one kg of synthetic graphite releases 4.9kg of carbon dioxide into the atmosphere, in addition to smaller amounts of sulfur oxide, nitrogen oxide, and particulate matter. While the carbon footprint of natural graphite is substantially smaller, it’s likely that China’s dependence on coal contributes to emissions from production.

Furthermore, concentrated production in China means that all this graphite travels long distances before reaching Western markets like the United States. These extensive shipping distances further exacerbate the risk of disruptions in the graphite supply chain.

The Need for New Sources

As the demand for graphite increases, developing a resilient graphite supply chain is crucial to the European Union and the U.S., both of which have declared graphite a critical mineral.

New graphite mines outside China will be key to meeting graphite’s rising demand and combating a potential supply deficit.

Northern Graphite is positioned to deliver natural graphite in a secure, sustainable, and transparent manner for the green economy.

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