Copper could be anchored by aluminium alternative

Wood Mackenzie analysis has suggested long-term copper price increases are likely to face serious competition from aluminium.

Bank of America has stated that copper could exceed $US20,000 ($25,856) per tonne by 2024 if inventories run out.

Wood Mackenzie senior vice president and vice chair for metals and mining, Julian Kettle said if copper prices reach this level, demand for high volume applications that require electricity could see a surge in demand for aluminium, which is cheaper than the red metal.

“Too many forecasts ignore the fact that aluminium is a serious competitor to copper in a number of high volume applications, including high- and mid-voltage power cable, busbars, transformer windings and motor windings,” Kettle said.

“…Even if what we believe are fanciful forecasts of US$15,000-$20,000 per tonne for copper prove prescient, without commensurate aluminium prices of US$5,000-7,000 per tonne copper would see massive demand destruction, which would be accompanied after some time lag by supply growth.”

Aluminium is 40 per cent less conductive than copper but is only 30 per cent of the density of copper.

“This means that an aluminium cable is around 52% of the weight of a copper cable with the same conductivity, a property offering handling and installation benefits,” Kettle said.

Copper reached a record high of $US10,361 ($13,200) per tonne on the London Metal Exchange (LME) in May, with Goldman Sachs predicting that copper would hit $US15,000 per tonne by 2025.

According to Kettle, copper projects must be developed to meet energy transition requirements.

However, long-term increased copper prices could see aluminium be the favourable metal for electrical conductivity.

“While copper is the metal with the best technical characteristics, once economics are brought into the equation its superiority is far less clear cut. In fact, given its lower cost, aluminium wins out against copper under virtually any realistic long-term price scenario,” Kettle said.

“Cost push in copper could lead to price pull in aluminium such that copper prices could sustainably be maintained at US$10,000 per tonne when aluminium is at US$3,300 per tonne.”

Kettle said if prices increase to $US15,000-$20,000, the clean energy transition may not be met.

“…Prices getting anywhere near these levels would send a strong signal to the market that the industry cannot meet the challenge of the energy transition, with the result that alternatives would be sought.”

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