Green revolution price hike as copper market surges
Copper has doubled from the lows seen a year ago and is near a nine-year high, reports Bloomberg. Amid predictions of a new commodity supercycle kicking off, many analysts say the top hasn’t yet been reached for a metal that’s core to the green energy drive.
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. 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 $28.7trn grid build out required.
Part of that 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. But that then means a lot more cabling, using expensive copper, than a centralised grid needed in the past.
According to forecasts from BloombergNEF, the 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 tonnes.
“Cities, electrification and copper go together,” said Sanjeet Sanghera, an analyst at BNEF in London. “Copper plays an important role.”
The metal is heavily used in underground cabling because of its conductivity, which is almost twice that of aluminium. That lowers the amount of energy needed to produce electricity.
A 240-kilometer electricity interconnector between Britain and France called IFA2 used 9,000 tonnes of copper, according to the UK’s National Grid. A planned link to Denmark of 760 kilometers will require 26,000 tonnes.
In offshore wind projects, copper is still a relatively small component of costs, but that’s set to increase in the coming years, to about 3% by 2050 from 1% currently, according to BNEF.
Vestas Wind Systems A/S estimates that a 100 MW wind farm using 4.2 MW turbines would use around 89 tonnes of copper in the turbines. At today’s price of around $9,170 per tonne, that would be about $816,000.
If 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, up 28% in the past year compared with 62% for copper. Demand for aluminum in power grid infrastructure is estimated to reach 7.6 million metric tonnes by 2050, according to BNEF.
“We see copper remaining integral for interconnectors,” said Srinivas Siripurapu, Chief Innovation Officer at cable manufacturer Prysmian. “But for offshore wind farms, there’s a lot of indications that there will be a push more towards aluminum driven by overall costs.”
It’s not yet clear how much of an immediate impact copper’s price increase will have on the finances of green power operators. Turbine maker Siemens Gamesa Renewable Energy hedges raw materials prices a year ahead, protecting them for now.
The 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.
While elevated prices mean companies have an incentive to ramp up investment in mining, which would help supplies, the downside is the length of time it takes to get projects up and running.
“If this price level holds, we should see announcements of new projects coming in the market,” Raul Jacob, Chief Financial Officer of Southern Copper Corp, said in an interview Monday. But the lags from decision to production will make the price cycle “a little bit longer than in the past.”
AngloGold Ashanti establishes BG Umoja JV in Tanzania
AngloGold Ashanti, in line with it s strategy to ensure a sustainable contribution to the economies of host countries, has established the BG Umoja joint venture (JV), in Tanzania.
Awarded a $186m two-year mining contract for the Nyankanga and Geita Hill underground mining projects, the 80/20 joint venture is a partnership between Africa Underground Mining Services (AUMS) Tanzania, a subsidiary of Australia’s Perenti Group, and local drilling services and mining- supply company, Geofields Tanzania Limited.
The partnership is modelled on a similar underground mining joint venture at the Company’s Obuasi Redevelopment Project in Ghana between AUMS Ghana and Accra-based, wholly Ghanaian-owned Rocksure and will help build local specialised mining capacity.
“We’re working with our experienced mining contractors to assist in establishing local joint ventures for long-term transfer of sustainable skills, and to continue building on our sustainable local procurement programmes,” commented Sicelo Ntuli, AngloGold Ashanti’s Chief Operating Officer: Africa.
“AngloGold Ashanti is building sustainable local procurement programmes that will allow it to stimulate economic and social development at all of its operations, evidenced by the significant contribution Geita has made to the fiscus and people of Tanzania.”
AngloGold Ashanti’s annual expenditure with indigenous Tanzanian suppliers has almost tripled to $162mn since 2016. The company’s local team in Tanzania has set itself an ambitious target of 60% to 70% of all expenditures with indigenous Tanzanian companies, by 2025.
Scope 3 Emissions
In addition, AngloGold Ashanti’s Geita Gold Mine has awarded a two-year fuel transportation contract, worth approximately $10.8m a year, to two local contractors - one of which is originally from Geita. This is in line with the mine’s commitment to contribute to the economies of host communities. The Geita-based company was part of Geita Mine’s supply chain capacity building initiative for host community suppliers, a partnership between the Mine and the National Economic Empowerment Council.
To influence Scope 3 emissions, trucks are to be compliant with EURO IV emissions standards, tankers are to be made of an aluminium alloy material to reduce weight and the age of the fleet will be maintained at less than six years.
Diversity & Inclusion
The contractors already employ women fuel tanker drivers, fulfilling the Mine’s requirements for diversity and inclusion. The two contractors both own workshop facilities in Geita town and participate in social initiatives aimed at uplifting the lives of host community residents.
AngloGold Ashanti has been operating at Geita Gold Mine for more than 20 years, with the project initially a single pit mine, evolving now to a predominantly underground operation, employing 5,700 employees and contractors.
Earlier this year, the Government of Tanzania recognized AngloGold Ashanti’s contribution to the economy of the country, awarding it for its outstanding performance in a number of areas, including environmental and safety performance, corporate social investment, the best taxpayer in the mining sector, the runners up in local business content and overall best performer in the mining sector in Tanzania in 2019/2020.
Geita Gold Mine
Geita, one of AngloGold Ashanti’s flagship mines, is located in north-western Tanzania in the Lake Victoria goldfields of Mwanza region, about 120km from Mwanza and 4km west of the town of Geita. It has been in operation as a large-scale mine since 2000.