China

China’s biggest demand sector is power (electricity generation and distribution) at 50% of total use, followed by air conditioning (15%), transportation (10%), construction (9%), consumer and general products (9%), and electronical and electronic products (7%).

China's 14th five-year plan will boost research and development spending by more than 7% annually over the five years to the end of 2025. This is expected to result in greater copper demand in all consumption sectors.

The State Grid Corporation of China estimates that total investment in power grids and related industries during the 14th Five-Year Plan period will reach CNY6tn (US$939.6bn). However, the era of large investment in China’s power grid is difficult to return to the past. The actual investment in power grids completed by the State Grid averaged at CNY490.7bn (US$76.8bn) between 2016 and 2018, followed by a notable drop to around CNY450bn (US$70.5) in 2019 and 2020. Although downtrend has been observed in power grid investment in recent years, a sharp decline in the next five years is unlikely. Transformation of the energy industry structure is expected to contribute additional copper consumption. This will allow power industry to maintain a moderate increase in copper consumption.

Driven by the objectives of peaking carbon dioxide emissions by 2030 and carbon neutrality by 2060, China is speeding up renewable energy transition. Newly installed solar photovoltaic capacity in China was 48.2GW in 2020, a year-on-year increase of 60%, taking the total installed solar photovoltaic capacity in China to 253GW.

The newly installed solar photovoltaic capacity of China is expected to be 55 - 65GW in 2021. It is estimated that the average newly installed solar photovoltaic capacity of China will be 70 - 90GW per annum during the 14th Five Year Plan period, and China will become the centre of the world in terms of photovoltaic new energy field. A photovoltaic solar power plant contains approximately 5.5t of copper per megawatt of power generation. It is estimated that in the next five years, the annual average copper demand for new photovoltaic installations will reach 440t, an increase of 66% from 2020.

Building new infrastructure has recently become a top development priority for China – and refers to infrastructure that is ‘digital, smart, and innovative’. The new infrastructure includes seven key areas: 5G networks, industrial internet, inter-city transportation and rail system, data centres, AI, ultra-high voltage power transmission, and new-energy vehicle charging stations. The new infrastructure plan will boost China’s economy and demand for copper. It is estimated that the new-infrastructure-related industries will consume approximately 140kt of copper in 2021, a 23% increase from 2020.

Electric vehicle production is expected to drive China’s copper consumption in transport sector. At an average of 83kg of copper, the typical electric vehicle uses nearly four times as much of the metal as a conventional car. While electric vehicle sales have been subdued in due to a combination of the COVID-19 pandemic and a reduction in government subsidies, China has ambitions to be a leading electric vehicle manufacturing centre by 2025, as part of its Made in China 2025 initiative. China plans to boost sales of new energy vehicles to make up 20% of new car sales by 2025, from less than 5% last year.

In terms of copper usage for construction including air conditioning, China's investments in real estate development are expected to remain resilient in 2021.

From January to April 2021, China's investment in real estate development was CNY4,024bn (US628bn), up 21.6% on year, with an average growth of 8.4% in the past two years. The newly started area of was 539.05 million square meters in the first four months, a year-on-year increase of 12.8%, while the completed area was 227.36 million square meters, a year-on-year increase of 17.9%. It is expected that the completed area will grow at accelerated rates from 2021 and into 2022 and narrow the gap between the nearly started area. This will further support copper consumption from the post-construction stage.

United States

In the US, the largest consumption sector is construction at 43%, followed by electrical and electronic products (20%), transportation (20%), consumer and general products (10%), and industrial machinery and equipment (7%). 

President Biden’s “Build Back Better” infrastructure plan focuses heavily on physical infrastructure and transition to a low-carbon economy. Clearly, copper with all his green energy applications will be more in demand in all consumption sectors.

The rapid shift to electric vehicles is central to President Biden’s pledge that the US will cut its climate-warming emissions 50% from 2005 levels by 2030 and make US electricity carbon-neutral by 2035. This ambitious goal would require a radical transformation of the nation’s economy, including cars and trucks powered by the internal combustion engines being replaced by their zero-emission counterparts.

The US market share of plug-in EV sales is currently only one-third the size of the Chinese EV market. The President is proposing a US$174bn investment to win the EV market. He plans a US$15bn investment to build a national network of 500,000 EV chargers by 2030. His plan also will replace 50,000 diesel transit vehicles, electrify at least 20% of the nation’s school bus fleet, and replace the government’s fleet of 645k vehicles with electric vehicles.

The US is advancing future-growth sectors, like green-energy production and manufacture of wind turbines. It has set a goal to deploy 30GW of offshore wind in the US by 2030. Meeting this target will trigger more than US$12bn per year in capital investment in projects. This will unlock a pathway to 110GW by 2050. Copper content per installed wind turbine is 2.5 – 6.4t/MW , according to the Copper Alliance. This means the planned offshore wind turbine capacity of 30GW would require between 75 – 192kt of copper. This estimate can range even higher, with Denmark’s Vestas, the biggest wind turbine manufacturer, estimates that a 100MW wind farm using 4.2MW would use around 89t of copper in the turbines.

In addition to the EV and wind energy plans, Biden’s plan will lay thousands of miles of transmission lines and bring high-speed broadband to every American. He also plans to build, preserve, and retrofit more than two million homes and commercial buildings, modernise schools and childcare facilities, and upgrade veterans’ hospitals and federal buildings. These plans would further support demand for copper in power and construction sectors.

Electrified Future

Over the long-term, a huge amount of copper will be needed to build new and sustainable energy infrastructure as the global economy electrifies and decarbonises. This historic shift away from fossil fuels will occur fastest in democratic nations where a large proportion of the population desires a shift to low-carbon technologies. AME expects refined copper demand to grow at a CARG of 2.2% over the long-term (2026 – 2040), reaching 39,712kt.

Substitution of copper by other metals such as aluminium due to copper’s higher price, will continue in the medium term. Sustained higher copper prices would stimulate substitution and would be a downside risk to copper demand.