Macroeconomic Themes ~ Copper Stock Picks - April 2022
Our Equities Trader, Joseph Raad, discusses macroeconomic themes for the month of April.
Copper’s uses and relevance in the global push towards a decarbonised world is becoming more prevalent. It is one of the most utilised commodities in the world and can be recycled repeatedly without a loss in performance. Its conductivity, malleability and durability make it integral in the development of electric vehicle (EV) batteries and renewable energy generation through solar, hydro, thermal and wind. Copper's applications help reduce CO2 emissions and lowers the amount of energy needed to produce electricity. In many renewable energy systems, there is 12 times more copper than in traditional systems.
According to Copper Development Association, conventional cars contain around 8kg-22kg of copper, whereas battery electric vehicles contain approximately 83kg. Demand for EVs has continued to exceed expectations. Infrastructure such as charging stations and improved transmission lines will be required to support this growing trend. Deloitte has forecasted total EV sales growing from 2.5 million in 2020 to 11.2 million in 2025, then reaching 31.1 million by 2030, representing approximately 32 per cent of the total market share for new car sales. This has been spurred by the announcements of various political initiatives to combat global warming. For example, in July 2021, the EU proposed an effective ban on the sale of new petrol and diesel cars from 2035, aiming to speed up the switch to zero-emission EVs.
According to Reuters, copper used in EVs, batteries and chargers could account for as much as 10% of world refined consumption by 2030, and such consumption is expected to grow at a healthy annual rate of 1.7% to reach 28 million tonnes in 2027. However, according to Rystad Energy, global demand for copper will outweigh supply by more than six million tonnes by 2030. A deficit as such would have far-reaching ramifications for the energy transition, as there is currently no substitute for copper in electrical applications. Copper demand is projected to rise 16% by the end of the decade, reaching 25.5 million tpa by 2030, compared with a supply forecast showing a 12% decrease versus 2021 levels, coming in at 19.1 million tpa.
Copper Stock Picks
Being one of the biggest producers in the market, OZ Minerals (ASX:OZL) explores for and mines mainly copper. Copper is important for a low carbon future and economic wellbeing which, in turn, helps the Company achieve its purpose and contributes to a better future.
Hot Chili Limited (ASX:HCH) has three key copper projects, Cortadera, Productora, and El Fuego. These are all located in close proximity to one another. They are planning to be production by 2026 and if that’s the case, they will capitalise on those macroeconomic themes and trends. They have a very large resource base of almost one billion tonnes of copper across all their projects and are approaching the DFS stage.
Locksley Resources (ASX:LKY) is an Australian exploration company. They are focused on identifying and assessing opportunities for the acquisition, exploration and development of copper and other mineral resources projects in Australia that have the potential to deliver significant growth for shareholders.
Significant investment in copper mining will be required to ensure the global demand for the metal is met over the course of the next decade.
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