Tuesday, December 15, 2009

Copper Rush?

I was reading an online article in the UK's Telegraph that had me a bit baffled. The lede had to do with Al Gore as getting rich on environmental policy- then had nothing to back up the assertion.

But, I soldiered on, and came to something of genuine interest- the likely huge increases in the use- and mining of- copper, in these hybrid and electric cars.

According to research by the European Copper Institute, hybrid cars need a staggering 33kg of copper in their construction – about the weight of an average 12-year-old child. This compares with 20kg – 25kg of copper in a conventional car.

About 3kg extra is needed for the electric compressor, the converter/rectifier needs 2kg, the lithium-ion battery needs 8kg and high voltage wiring requires a further 8kg.

"2010 could be the year of the electric car," says Harvey Perkins, associate partner at KPMG. "By exempting electric company cars from company car tax and giving them 100pc first year capital allowances, it will encourage fleets to invest and encourage production.

Although the incentive is not huge because of the expense of electric vehicles, Mr Perkins thinks it will "seed the market".

On Tuesday last week, Ford said that it would invest up to $500m (£307m) to assemble hybrid and plug-in hybrid cars, as well as the construction lithium-ion batteries in Michigan, if it received tax credits from the state. Currently only the development of batteries for plug-in vehicles garners these credits in the US.

Lithium is another commodity that should do very well out of the rush to sustainability. The US Department of Energy is supporting the development of lithium batteries, with President Obama President Barack Obama unveiling $2.4bn of funding in March to develop generation plug-in hybrid electric vehicles. Lithium battery development is key to this strategy, although the more immediate beneficiary is likely to be copper.

Fears are growing that a serious shortage of mine capacity across the world will lead to the copper market moving into a serious deficit from 2013 and beyond.

Maybe gold isn't the only metal to add to one's portfolio. Shortages are great opportunities.

Ok, it was said that the increased use of copper will decrease the production of carbon. Great. But, how much carbon will the increased mining of copper create, and will the offset be a net gain? And, what environmental damage will be caused by the copper mining? And, if we run out of copper, then what?

Worth noting that although we never seem to run out of any natural resource, animals do become extinct despite their ability to reproduce. How is it that man can find ever more ways of prizing out of the ground more and more of a finite substance, including those (like oil or coal) that were predicted in the 1970s to be exhausted by now?

1 comment:

Todd S. said...

A good way to play copper is by buying the stock FCX (Freeport-McMoRan). As for the last part, the "running out of X resource calculations" always fail to include increases in technology.