Right now, the supply of physical goods remains in short supply and all major economies are experiencing freight transport problems. Meanwhile, government income replacement programs have spurred demand.
These conditions have allowed for spectacular returns on raw materials and lesser-known goods that don’t normally attract headlines, such as lumber and used cars. However, these shortages and bottlenecks have diverted attention from the issues we all know are still in place and have created attractive prices on raw materials linked to the green energy transition.. If you look at some of the price levels, you might think that the transition to renewables has already occurred.
However, there are 1,300 million cars with an internal combustion engine (ICE) on the road and 10 million electric vehicles (EV), so that the percentage of the vehicle fleet of EVs only represents 0.7%. From a statistical point of view, the ecological transition has not even begun.
Each electric vehicle has between three and five times the copper content of a traditional vehicle, averaging almost 200 pounds per car (about 90 kilos). Copper is also crucial for the domestic and public chargers that will power these vehicles. It is in the electricity generators and in the transmission lines that supply it.
A single 3 megawatt wind turbine can hold up to 4.7 tons of copper. Solar panels can use 5.5 tons of copper per megawatt of generating capacity. On-grid storage batteries, necessary when using interruptible generation sources such as wind and solar, use up to 4 tons of copper per megawatt.
Production from copper mines is not easy to increase. The average copper mine takes between five and ten years to come online; there is at least one mine, started in 2011, that has not yet entered production. Richard Adkerson, CEO of the copper industry leader (Freeport McMoRan) recently stated that even if copper prices doubled overnight, he would not be able to increase production from the mines for at least five years.
Aluminum is another essential raw material for the ecological transition. It requires an enormous amount of energy to produce it, which creates two dynamics. First of all, it is one of the few materials that is profitable to recycle: up to 75% of all aluminum produced is still in use. The second dynamic is that China, which produces 56% of all the world’s aluminum, has limited its production to reduce energy use and the country’s carbon footprint. Therefore, the material will have to be produced in other countries where energy is more expensive. This will surely raise the cost of production.
Aluminum is crucial for the energy transition because it makes internal combustion engine vehicles lighter and more efficient; it also helps electric vehicles offset the weight of batteries. In celebration of Tesla Battery Day 2020, the company explained that a one-piece aluminum chassis that integrates the batteries into the frame was going to be the foundation of its unique selling proposition going forward.
The metals zinc and nickel are less talked about, but they also have interesting qualities. Zinc is used to galvanize steel and can extend its life up to 170 years. It is also used in pigments, batteries, and chemicals. Nickel is used to make the stainless steel needed for food preparation, for healthcare, and also for some batteries.
The energy transition is one of the largest and most expensive projects that humans have ever attempted. In the coming years, a substantial part of global GDP will be used to shift energy production from fossil fuels to industrial metals and battery materials. Unless you are a carpenter, don’t get distracted by wood prices, invest in what you think will be the future.