Insights

Educational Video

Copper: The Essential Power Player in the Energy Transition

Copper: The Essential Power Player in the Energy Transition

 

Video Transcript

Copper is Essential to Clean Energy

When it comes to electric power, copper’s essential role is unmatched. From the very first flicker of electric lights, to the rise of the digital age, to the transition to new power sources and the proliferation of electric vehicles, copper remains crucial.

With its high electrical and heat conductivity, copper can be found in the vast majority of today’s transformers, electrical wiring cores and conductors, and is a key component in the construction of renewable energy sources such as wind, solar, hydro, and thermal, as well as in electric vehicles.

As most of the world seeks to reach net-zero targets and transition to cleaner, renewable forms of energy, copper is a requirement. However, the amount of copper needed to successfully facilitate the energy transition is staggering. In fact, S&P Global has stated that “projected annual shortfalls will place unprecedented strain on supply chains.” And so, the race is on to produce enough copper to meet the ever-growing demand.

This may likely mean that both copper, and the companies that extract and produce it, could provide an attractive investment opportunity for those seeking alpha in their portfolios and a way to make an impact on the realization of the greener, net-zero emissions world.

Why Copper is Critical

Copper has a myriad of uses, and it wouldn’t be an overstatement to say that it is one of our most important resources. Used by people for thousands of years, copper continues to be used in nearly all facets of daily life. Nearly 70% of all copper produced is used in electrical applications1, which is why it’s so important to the energy transition.

Part of the reason copper is such a great conductor of electricity is due to its high free electron concentration. When a voltage is connected across copper, it pushes the free electrons and causes them to flow through the metal, creating an electrical current.

A material with a lot of free electrons is able to carry a current more easily than one with a smaller charge density. Because there are so many electrons in copper to carry the charge, they don’t need to move very fast. This means that they are much less likely to collide with atoms or impurities in the metal.

Copper also assists with improving something called the current rating, which is the current a cable is able to carry safely without overheating.

Copper has an array of other benefits when it comes to electrification, but with regard to renewable energy, copper really is an all-star. It helps to reduce CO2 emissions by lowering the amount of energy needed to produce electricity.2 The amount of copper required for most renewable energy systems is six times that of traditional energy systems.

Copper is also a critical component in the manufacturing of electric vehicles. While the average internal combustion engine vehicle contains approximately 48 pounds of copper, a typical EV contains nearly four times that amount.3

All of these factors, and even more than we have time for here, come together to paint a bright picture for copper and its role in the clean energy transition.

It’s projected that demand for copper may increase 58% by 2040, relative to 2022.4 However, the average grade of ore mined globally from existing mines has been declining as orebodies are depleted. This means that the development of new and emerging copper mines will be needed. As a result, copper mining companies—and perhaps newer copper mining companies, in particular—may be poised for growth.

Copper Mining May Be Well Positioned

Copper has been the reliable workhorse of the metals, having already facilitated untold innovations and set the stage for the modern world we enjoy today. Now, we believe it's time for this often-underappreciated commodity to ascend even further with the clean energy transition, where it likely may be destined to remain critical for decades to come.

As governments around the world continue to invest in meeting net zero carbon emissions goals, they are starting to acknowledge how vital raw materials are to reaching these goals. The EU has already proposed classifying copper as a critical raw material5 and among Canada's 31 critical minerals, six are initially prioritized by the government for their potential clean energy impact, including copper6.

As more and more countries start to understand just how much copper is needed for electrification, there could be a push to accelerate copper mining and processing.

Copper miners may be well positioned to benefit from increased investment in the low-carbon and renewable energy sector and may offer an attractive opportunity to investors seeking access to copper through companies that are upstream in the supply chain.

Footnotes

1 Source: Copper Alliance, 2023. https://copperalliance.org/resource/copper-recycling/

2 Source: Copper Alliance, 2023. https://copperalliance.org/policy-focus/climate-environment/renewable-energy

3 Source: ThinkCopper. Copper.org and Navigant Research. Global Copper Outlook 2022-2040, BloombergNEF.

5 Source:Bloomberg, March 2023. https://www.bloomberg.com/news/articles/2023-03-16/eu-proposes-designating-copper-and-nickel-as-critical-metals

6 Source: The Canadian Critical Minerals Strategy, Canada.ca, 2022. https://www.canada.ca/en/campaign/critical-minerals-in-canada/canadian-critical-minerals-strategy.html

 

Special Note: Jesse Day is not an employee or an affiliate of Sprott Asset Management LP. The opinions, estimates and projections ("information") contained within this content are solely those of the presenter and are subject to change without notice. Sprott Asset Management LP makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Sprott Asset Management LP assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Sprott Asset Management LP is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Sprott Asset Management LP. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell.

Important Disclosure

Past performance is no guarantee of future results. You cannot invest directly in an index. Investments, commentary and statements are unique and may not be reflective of investments and commentary in other strategies managed by Sprott Asset Management USA, Inc., Sprott Asset Management LP, Sprott Inc., or any other Sprott entity or affiliate. Opinions expressed in this content are those of the presenter and may vary widely from opinions of other Sprott affiliated Portfolio Managers or investment professionals.

While Sprott believes the use of any forward-looking language (e.g, expect, anticipate, continue, estimate, may, will, project, should, believe, plans, intends, and similar expressions) to be reasonable in the context above, the language should not be construed to guarantee future results, performance, or investment outcomes.

This content may not be reproduced in any form, or referred to in any other publication, without acknowledgment that it was produced by Sprott Asset Management LP and a reference to sprott.com.

The information contained herein does not constitute an offer or solicitation to anyone in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation.

The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering or tax, legal, accounting or professional advice. Readers should consult with their own accountants and/or lawyers for advice on specific circumstances before taking any action.

Important Message

You are now leaving Sprott.com and entering a linked website. Sprott has partnered with ALPS in offering Sprott ETFs. For fact sheets, marketing materials, prospectuses, performance, expense information and other details about the ETFs, you will be directed to the ALPS/Sprott website at SprottETFs.com.

Continue to Sprott Exchange Traded Funds

Important Message

You are now leaving sprott.com and linking to a third-party website. Sprott assumes no liability for the content of this linked site and the material it presents, including without limitation, the accuracy, subject matter, quality or timeliness of the content. The fact that this link has been provided does not constitute an endorsement, authorization, sponsorship by or affiliation with Sprott with respect to the linked site or the material.

Continue