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Could Tesla Drive Long-Term Copper Demand?

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Long-term copper demand

On its 3Q17 earnings call, Freeport-McMoRan (FCX) sounded positive about copper’s long-term demand. According to Richard C. Adkerson, Freeport’s CEO, “Around the world, manufacturing sectors are performing well. Chinese growth is exceeding expectations. And with the recent congress of the Communist Party in China, the outlook for Chinese growth continues to be positive.” He also added “Growth is continuing in Europe. And U.S. demand is solid with the prospects for future higher growth.”

Vehicle electrification

Adkerson also pointed to vehicle electrification as a bullish driver for global copper demand (GLEN-L)(ANTO). Remember that copper intensity is higher in electric vehicles (SPY)(SPX). According to the International Copper Association, 23 kg of copper is used in an internal combustion engine vehicles. On average, a hybrid electric vehicle uses 40 kg of copper. Copper content is even higher in plug-in hybrid electric vehicles and battery electric vehicles, at 60 kg and 83 kg, respectively.

The growing shift toward electric cars, pushed by governments around the world, is expected to support copper demand. Not only is copper content higher in electric vehicles, but also these vehicles would also require an expanded charging infrastructure as the electric car fleet grows globally. Notably, Tesla (TSLA) has its own supercharger network to aid vehicle charging. While electric vehicles have been around for a long time, the concept gained popularity with Tesla.

Meanwhile, Freeport expects copper demand to outpace supply. We’ll discuss this outlook in detail in the next part of this series.

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