Copper is a good bet for the future

Copper has been in use for at least something like 10,000 years thanks to the fact it forms naturally in relatively pure deposits. Prized for both its aesthetic qualities and its practical uses, it was originally used for decorative purposes before becoming the main show in town for a short period around 3,500 BC. The metal’s short reign would end when methods of forging bronze were discovered and took over.

Now copper is no longer seen as glamourous or desirable but, ironically, this is the point in time where it is most widely used. Thousands of years after it first emerged, copper is one of the foundations of the modern world, even though we never really think about it in such grand terms.

It is an ordinary material with extraordinary properties which allow it to conduct heat and electricity exceptionally well. The wires in your home, the metal in coins and guns, the circuits in computers and smartphones – all rely on copper.

And this ubiquity is only set to become more pronounced in the future as the world becomes increasingly reliant on electronics. One of the industries of the future which will need copious amounts of copper is electric vehicles.

Discussion around resources to build electric cars normally centres around the availability of lithium and cobalt, the key components in modern batteries. However, the growth of the market is also set to push the price up significantly because electric cars use three times as much copper as an old-fashioned fossil fuel car.

Analysts at Citigroup have confirmed this by studying long term trends in China, widely acknowledged as the world’s biggest and most promising electric car market. Sales of fossil fuel cars are down 9% in the country, with production of electric vehicles set to spike by more than 50% in the next year. This is projected to lead to 0.3% growth in the copper sector – which doesn’t sound like a lot, but it is significant growth given the size of the global market.

Furthermore, a new report from the International Council for Clean Transportation this week shows that electric cars are already cheaper to run than petrol or diesel alternatives in Europe. That economic reality, combined with the rising tide of anger regarding the toll which pollutants take on our bodies, is sure to push electric cars into the ascendancy in the very near future. Every major car company is hurriedly developing their own electric vehicles – they know what the future holds.

All of this helps to explain why copper prices have rallied by 5% this year, standing at US$6,139 a tonne, and are expected to hit US$6,700 by the end of 2019. The future is bright for copper and this may well be a good time to invest.