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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

EVs vs. Gas Vehicles: What Are Cars Made Out Of?

Electric vehicles can have 6 times more minerals than a combustion vehicle and be on average 340 kg heavier.

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What are Cars Made Out of? Electric Vehicles vs Gas Cars

EVs vs. Gas Vehicles: What Are Cars Made Out Of?

Electric vehicles (EVs) require a wider range of minerals for their motors and batteries compared to conventional cars.

In fact, an EV can have up to six times more minerals than a combustion vehicle, making them on average 340 kg (750 lbs) heavier.

This infographic, based on data from the International Energy Agency (IEA), compares the minerals used in a typical electric car with a conventional gas car.

Editor’s note: Steel and aluminum are not shown in analysis. Mineral values are for the entire vehicle including batteries and motors.

Batteries Are Heavy

Sales of electric cars are booming and the rising demand for minerals used in EVs is already posing a challenge for the mining industry to keep up. That’s because, unlike gas cars that run on internal combustion engines, EVs rely on huge, mineral-intensive batteries to power the car.

For example, the average 60 kilowatt-hour (kWh) battery pack—the same size that’s used in a Chevy Bolt—alone contains roughly 185 kilograms of minerals, or about 10 times as much as in a typical car battery (18 kg).

Lithium, nickel, cobalt, manganese, and graphite are all crucial to battery performance, longevity, and energy density. Furthermore, EVs can contain more than a mile of copper wiring inside the stator to convert electric energy into mechanical energy.

Out of the eight minerals in our list, five are not used in conventional cars: graphite, nickel, cobalt, lithium, and rare earths.

MineralContent in electric vehicles (kg)Content in conventional cars (kg)
Graphite (natural and synthetic)66.30
Copper53.222.3
Nickel39.90
Manganese24.511.2
Cobalt13.30
Lithium8.90
Rare earths0.50
Zinc0.10.1
Others0.30.3

Minerals listed for the electric car are based on the IEA’s analysis using a 75 kWh battery pack with a NMC 622 cathode and graphite-based anode.

Since graphite is the primary anode material for EV batteries, it’s also the largest component by weight. Although materials like nickel, manganese, cobalt, and lithium are smaller components individually, together they make up the cathode, which plays a critical role in determining EV performance.

Although the engine in conventional cars is heavier compared to EVs, it requires fewer minerals. Engine components are usually made up of iron alloys, such as structural steels, stainless steels, iron base sintered metals, as well as cast iron or aluminum alloyed parts.

EV motors, however, often rely on permanent magnets made of rare earths and can contain up to a mile of copper wiring that converts electric energy into mechanical energy.

The EV Impact on Metals Markets

The growth of the EV market is not only beginning to have a noticeable impact on the automobile industry but the metals market as well.

EVs and battery storage have already displaced consumer electronics to become the largest consumer of lithium and are set to take over from the stainless steel industry as the largest end-user of nickel by 2040.

In 2021 H2, 84,600 tonnes of nickel were deployed onto roads globally in the batteries of all newly sold passenger EVs combined, 59% more than in 2020 H2. Moreover, another 107,200 tonnes of lithium carbonate equivalent (LCE) were deployed globally in new EV batteries, an 88% increase year-on-year.

With rising government support and consumers embracing electric vehicles, securing the supply of the materials necessary for the EV revolution will remain a top priority.

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Electrification

The Key Minerals in an EV Battery

Which key minerals power the lithium-ion batteries in electric vehicles?

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minerals in an EV battery infographic

Breaking Down the Key Minerals in an EV Battery

Inside practically every electric vehicle (EV) is a lithium-ion battery that depends on several key minerals that help power it.

Some minerals make up intricate parts within the cell to ensure the flow of electrical current. Others protect it from accidental damage on the outside.

This infographic uses data from the European Federation for Transport and Environment to break down the key minerals in an EV battery. The mineral content is based on the ‘average 2020 battery’, which refers to the weighted average of battery chemistries on the market in 2020.

The Battery Minerals Mix

The cells in the average battery with a 60 kilowatt-hour (kWh) capacity—the same size that’s used in a Chevy Bolt—contained roughly 185 kilograms of minerals. This figure excludes materials in the electrolyte, binder, separator, and battery pack casing.

MineralCell PartAmount Contained in the Avg. 2020 Battery (kg)% of Total
GraphiteAnode52kg28.1%
AluminumCathode, Casing, Current collectors35kg18.9%
NickelCathode29kg15.7%
CopperCurrent collectors20kg10.8%
SteelCasing20kg10.8%
ManganeseCathode10kg5.4%
CobaltCathode8kg4.3%
LithiumCathode6kg3.2%
IronCathode5kg2.7%
TotalN/A185kg100%

The cathode contains the widest variety of minerals and is arguably the most important and expensive component of the battery. The composition of the cathode is a major determinant in the performance of the battery, with each mineral offering a unique benefit.

For example, NMC batteries, which accounted for 72% of batteries used in EVs in 2020 (excluding China), have a cathode composed of nickel, manganese, and cobalt along with lithium. The higher nickel content in these batteries tends to increase their energy density or the amount of energy stored per unit of volume, increasing the driving range of the EV. Cobalt and manganese often act as stabilizers in NMC batteries, improving their safety.

Altogether, materials in the cathode account for 31.3% of the mineral weight in the average battery produced in 2020. This figure doesn’t include aluminum, which is used in nickel-cobalt-aluminum (NCA) cathode chemistries, but is also used elsewhere in the battery for casing and current collectors.

Meanwhile, graphite has been the go-to material for anodes due to its relatively low cost, abundance, and long cycle life. Since the entire anode is made up of graphite, it’s the single-largest mineral component of the battery. Other materials include steel in the casing that protects the cell from external damage, along with copper, used as the current collector for the anode.

Minerals Bonded by Chemistry

There are several types of lithium-ion batteries with different compositions of cathode minerals. Their names typically allude to their mineral breakdown.

For example:

  • NMC811 batteries cathode composition:
    80% nickel
    10% manganese
    10% cobalt
  • NMC523 batteries cathode composition:
    50% nickel
    20% manganese
    30% cobalt

Here’s how the mineral contents differ for various battery chemistries with a 60kWh capacity:

battery minerals by chemistry

With consumers looking for higher-range EVs that do not need frequent recharging, nickel-rich cathodes have become commonplace. In fact, nickel-based chemistries accounted for 80% of the battery capacity deployed in new plug-in EVs in 2021.

Lithium iron phosphate (LFP) batteries do not use any nickel and typically offer lower energy densities at better value. Unlike nickel-based batteries that use lithium hydroxide compounds in the cathode, LFP batteries use lithium carbonate, which is a cheaper alternative. Tesla recently joined several Chinese automakers in using LFP cathodes for standard-range cars, driving the price of lithium carbonate to record highs.

The EV battery market is still in its early hours, with plenty of growth on the horizon. Battery chemistries are constantly evolving, and as automakers come up with new models with different characteristics, it’ll be interesting to see which new cathodes come around the block.

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