1. Home
  2. Electric Vehicles
  3. China’s electric cars: Can they drive Chilean copper?

China’s electric cars: Can they drive Chilean copper?

0
0

Growing demand for battery storage and lithium could be a silver lining for Chile’s mining industry.

In the arid north of Chile some 1,500km from the capital, Chuquicamata has been a plentiful source of copper since before the rise of the Inca Empire in the 1400s.

“Chuqui” – as it is informally known – is one of the country’s most emblematic mines, a symbol of human ingenuity despite the fortnight of labour strikes held this June against mine owner Codelco over job cuts and compensation.

Economic reality sunk in last month when the mine shut down, as miners demanded better wages at the same time the place began an expensive transformation from an open pit to an underground shaft mine.

The problem is twofold: the mine’s massive mineral reserves are dropping whilst copper prices are also declining, so miner pay has been going down.

This crisis is a big blow for Chile – the world’s largest copper exporter – where the industry accounts for about one-tenth of the national economy.
‘Copper-intensive component’

The price of copper has fallen by about 10 percent since April, following a trend that many commodities have seen amid global economic instability, hunger for the mineral has weakened.

And as the miners in Chuquicamata well know, market factors can translate into real pain.

Despite the recent dip, analysts are generally bullish about the future of copper, thanks to China’s push to develop the largest electric vehicle (EV) industry in the world. This effort means Chile’s copper industry, worth $31.5bn a year, may be poised for a resurgence.

And it is precisely this sort of spark that will drive discussions at the Asia-Pacific Economic Cooperation summit that kicked off Friday in Chile, highlighting links between nations on both sides of the world’s largest ocean.

Cars that run solely on electric batteries are made with an average of four times as much copper as automobiles with internal-combustion engines. “Energy storage is the most copper-intensive component of electro mobility,” says the International Copper Association. This is why the element is increasingly coveted, with electric cars ravenous for the metal.

“The higher copper intensity of electric vehicles is actually already playing a significant role to offset the decline in 2019 copper demand,” Oliver Nugent, a commodities strategist at Citi, told Al Jazeera.

China is expected to account for about half of the global EV industry by 2025, according to a recent University of Pennsylvania report.

“This growing demand base for copper is significant in that it goes beyond the pace and reach of scrap and existing mine supply,” Nugent said, adding that it confirmed “the need for long-term investment in new copper mining projects”.

China is Chile’s main trading partner. In the first three quarters of 2018, total bilateral trade between the two countries added up to more than $31bn. Sales of mining products to China were over $14bn, and most of this was copper, according to official Chilean figures.

And that could continue to grow. Beijing is investing for the long haul in its EV industry. Overall car sales in China have been dropping for a year, except for electric car sales, which continue to grow.

In May, monthly production of EVs increased 25 percent over the prior year to 102,000 units, according to the China Association of Automobile Manufacturers. Sales of electric vehicles rose 9.6 percent to 71,000 units during the same period. All this occurred as total vehicle production fell 21 percent year-over-year and sales fell 16 percent from the same month a year earlier.

The generally positive outlook around China’s EV industry has copper analysts salivating at the prospect of a bull market for the metal, for which production has barely grown since 2013.

“EV copper demand and related infrastructure account for about two-thirds of our expected growth forecasts between 2018 and 2030,” Nugent said.

Cochilco, Chile’s state copper agency, said in January that copper production could jump 30 percent over the next decade.

And Codelco, the state-run mining firm and top global copper producer – which owns Chuquicamata – recently initiated a 10-year, $40bn investment drive to increase productivity. Other firms active in Chilean copper include BHP Group Ltd, Glencore Plc, Antofagasta Plc, and Anglo American Plc.
‘Enormous potential’

The South American mining powerhouse is also a major producer of other materials used in EVs.

“Chile has the largest copper deposits in the world, but it also has lithium and cobalt, which are necessary for electric car batteries,” Jose Pablo Astudillo Rodriguez, a director at Elqui Minerals, an international copper and cobalt consultancy, told Al Jazeera.

“Electric mobility worldwide will mean diminished demand for oil, and many oil companies will move towards battery producers for electric vehicles,” he said, referring to the idea that petroleum producers could be forced to diversify their businesses as the alternative energy market grows. “Chile will supply the necessary copper, lithium and cobalt compounds.”

Chile holds 52 percent of the world’s lithium reserves, according to official data.

“In 2018, more than 50 percent of [lithium] demand came from electric vehicles. This share will grow in the next few years, even reaching around 90 percent of demand by the late 2020s,” said Jose Hofer, senior analyst at Benchmark Mineral Intelligence.

With the other commodities besides copper that are key for electric mobility, the situation may be tricky – environmentally and otherwise – despite the opportunities ahead.

“Nevertheless, for that to be a reality, several aspects in terms of mining concessions need to be taken care of,” Hofer said, referring to reforms necessary to continue exploring and building new sites.

For Chile’s mining industry and the miners at Chuquicamata, hope for the future is found on the streets and highways of the world, with EV drivers putting their pedals to the metal.

“In the decade to 2027, copper demand for EVs is expected to multiply over nine times, to 1.74 million tonnes – when 27 million vehicles are expected to hit the roads globally,” according to the International Copper Association.

Since Chuquicamata and the other mature mines in Chile likely are unable to supply enough copper to meet demand, a bottleneck could then drive up prices in the long term and also impact the development of the global electric vehicle industry.

With copper the main mining export by far, Chile is searching for a more sustainable path forward.

“As Chile is the largest source of [lithium] reserves in the world, there is an enormous potential for the Chilean economy,” said Hofer, describing a way to diversify economically and maximise the benefits of all the country’s natural resources.

Source : aljazeera
Anand Gupta Editor - EQ Int'l Media Network

LEAVE YOUR COMMENT

Your email address will not be published. Required fields are marked *