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In a report released last May, Goldman Sachs (NYSE: GS) analysts estimated that copper prices could skyrocket to $15,000 per ton, a growth of more than 66%, by 2025. While many commodities are enjoying a recent price boost thanks to increasing demand as national economies reopen, copper’s recovery has been especially strong due to the increased urgency with which nations are shifting toward greener technologies and energy sources. The metal that helped spark the dawn of civilization more than 10,000 years ago is now thought to be key to helping us transition to a more sustainable future. Here’s why the clean energy market has made analysts so bullish on copper.
Copper As the New Clean Energy Commodity
In the same report, Goldman Sachs called copper the “new oil,” a bold statement but not without merit. The highly conductive, naturally corrosion-resistant metal is already a staple resource in the manufacturing of most electronics.
As economies worldwide drive up demand for more electric vehicles, however, the need for the large quantities of copper used to build them will grow right along with it. While our current gas-guzzling vehicles use an average of 50 pounds of copper for the wiring and electrical components in the car, their cleaner, all-electric counterparts need about 176 pounds. That’s just for the vehicle itself. The charging stations and other infrastructure needed to power these electric vehicles will need even more copper.
Similarly, most clean tech — including renewable energy systems like solar, hydro or wind farms — requires as much as 12 times the amount of copper used in our current non-renewable energy systems.
The Looming Supply/Demand Crunch
Just as demand for copper begins to increase exponentially, worldwide mine output of the clean energy metal is on the decline. COVID-19-related lockdowns and production halts led to a 5% reduction in mine production of copper in the United States and even more dramatic declines in key copper suppliers like Peru and Chile.
Even before the pandemic, miners had been under-investing in copper for years as other commodities seemed more attractive in the short term. Years of under-investment combined with declining production in 2020 could lead to a supply crunch in the years ahead as mines scramble to ramp up production in line with rapidly increasing demand.
Investors Eyeing Copper Investment Opportunities
While investing in green tech is a popular and profitable trend, investors who want to do so without gambling on which specific tech is most likely to succeed are turning to commodities, especially copper. Since about 75% of copper is already used in wiring, transmitters and other electrical components, the 12 times increase in demand across clean tech means that copper is almost definitely going to see a significant price boost regardless of which specific tech takes off.
As a result, looking for mining companies with existing or potential copper-producing mines is a great way to gain exposure to this trend. Junior mining companies like American Pacific Mining Corp. (OTCQB: USGDF) with its Madison Copper Gold Project right in the heart of Montana’s copper belt can present high growth potential for investors looking to cash in on this rapidly growing market.
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