EV innovations may curb demand growth for copper
EV automaker Tesla (NASDAQ: TSLA) and its competitors are adopting engineering advancements aimed at increasing efficiency in their automobiles, thereby reducing the copper content, as reported by Reuters.
These developments may restrict the demand surge for the metal as the next generation of EVs hits the market, according to industry experts.
Despite a significant increase in EV sales, mainly attributed to China’s growth, copper demand is expected to continue to rise through the remainder of the decade.
However, innovations in EVs are presenting as a potential demand-limiting factor, as per two recent forecasts.
Less copper per vehicle
Copper has long been considered a key element of the green-energy transition, largely due to its extensive use in electric car wiring.
An EV can use up to 80 kilograms of copper, a stark contrast to the 20 kilos typically used in a conventional combustion engine vehicle.
A recent report by Goldman Sachs (NYSE: GS) revealed that EVs accounted for two-thirds of the global copper demand growth last year.
Yet, EV and battery manufacturers have discovered methods to reduce weight and cost, consequently requiring less copper per vehicle, stated Goldman Sachs and consultancy firm CRU Group in separate reports.
Revised predictions
CRU Group revised its prediction for copper usage in an average EV to 51-56 kilos between 2023 and 2030, a decrease from its earlier forecast of 65-66 kilos for the same period. Goldman Sachs echoed a similar sentiment, predicting copper content in an average EV would drop to 65 kilos by 2030, compared to its previous 73 kilo estimate.
Both institutions attributed this decrease to a series of engineering modifications aimed at enhancing the range, reducing the weight, and improving the efficiency of EVs, which will collectively result in reduced copper content.
Robert Edwards, an analyst from CRU Group, hinted at a potential break in the demand narrative for copper, stating: “Some of the projections out there have been very aggressive in terms of potential green energy demand for copper.”
More compact batteries
Engineering adaptations include transitioning to more compact batteries that don’t require cell-to-module wiring, employing thinner copper foil in battery cells and migrating to higher voltage systems necessitating less wiring.
In a notable instance, Tesla anticipates that by adopting a 48-volt system for its secondary battery in future EVs, the need for copper could be reduced to a quarter of the current requirement, CEO Elon Musk informed investors in May.
Goldman Sachs identified these innovative battery developments and potential transitions to higher voltage systems as “the main threat to copper’s EV demand leverage”. The institution predicts copper demand for EVs to reach 1 million tonnes in 2023 and increase to 2.8 million by 2030. This is a revision from its previous forecast of 3.2 million tonnes by 2030.
Nonetheless, an increased market share of EVs seems to offset the impact of reduced copper usage per unit. CRU projects that by 2030, EVs and plug-in hybrids will constitute 42% of global vehicle sales, an increase from its previous prediction of a third.
Prices dropping
CRU’s Edwards further indicated that those bullish on copper might have overlooked the potential for EV manufacturers to introduce technologies that reduce the metal’s usage.
Meanwhile, the three-month benchmark copper price on the London Metal Exchange reached a record US$10,845 per tonne in March 2022, largely due to optimistic EV demand projections, but has since dropped nearly a quarter.