Copper has roughly doubled from the lows seen a year ago and was near a nine-year high at the start of the month. Amid predictions of a new commodity super cycle kicking off, many analysts say the top hasn’t yet been reached for a metal that’s core to the green energy drive. The price weakened as much as 4.9% to $8,660. Demand from renewable power generation, battery storage, electric vehicles, charging stations and related grid infrastructure accounts for about a fifth of copper consumption, according to Citigroup Global Markets Inc. With governments aiming for aggressive net zero emission targets in the coming decades, that means more clean electricity, a shift that’s likely to be copper-intensive given the $28.7 trillion grid build out required. Growth will come from the need to connect new renewable power plants with customers. That’s because it’s often cheapest to build such plants wherever the wind or sun resource is strongest, which could be in the middle of the sea or an isolated desert.
Global power grid will grow by 48 million kilometers (30 million miles) by 2050. That’s enough to wrap around the circumference of the Earth nearly 1,200 times and equates to a doubling in copper demand to 3.6 million metric tons. Metal is heavily used in underground cabling because of its conductivity, which is almost twice that of aluminum. That lowers the amount of energy needed to produce electricity. Copper’s rally proves long-lasting and pushes up the cost of green investment, some wind farms may use cheaper aluminum where they can. Prices have risen less sharply compared with copper. Demand for aluminum in power grid infrastructure is estimated to reach 7.6 million metric tons by 2050. Metal’s rally has been driven in large part by investors who see demand soaring as the green revolution gathers pace. But their early optimism may end up pushing up costs for governments as they start putting infrastructure spending packages to work. Higher copper consumption for decarbonization could drive annual demand growth of as much as 3%, said Max Layton, managing director for Commodities Research at Citigroup Global Markets Inc. That will add to periods where supplies fall short, with upside potential for prices.