London Calling gets the wind up, as copper receives "green" boost
We've long pooh-poohed claims of aluminium being the "greenest metal", uniquely suited to the engineering of sustainable development outcomes.
Such a false assertion was made only last week by India's largest producer of the metal.
Vedanta Resources plc published a rejoinder to longstanding claims by Amnesty International that it's been committing human rights violations around its Lanjigarh alumina refinery in Orissa.
The company also boasted that India uses 40% of aluminium output to "support the growth of [the country's] electrical power supply through the construction of pylons..." [The Lanjigarh development story: Vedanta's perspective, Vedanta Resources plc, August 2012, page 17].
If this were the case, then Vedanta could reasonably argue that it's making a significant impact on reducing poverty, and stimulating better livelihoods, among millions of downtrodden Indian citizens.
Unfortunately, Vedanta got the facts wrong - and badly so.
For, according to its own figures, only 5% of India's aluminium is currently devoted to "electrifying" its rural poor, while 40% of total output actually goes into packaging - much of which is not only frivolous, but priced well beyond the reach of an average family.
The data certainly doesn't substantiate Vedanta's boast to be leading an industrial sector " vital to the wider development objectives of the country"[The Lanjigarh development story..., ibid, page 17].
The other widely-used nonferrous metal, ostensibly critical to electricity generation, is copper, which few people would describe as "green" (except when it's become oxidised).
But ,now, consultancy Wood Mackenzie (it says it's "the most comprehensive source of knowledge about the world's energy and metals industries") argues for putting the red metal firmly into the sustainable energy camp.
The Edinburgh-based firm predicts that wind power will significantly expand, as European states aim to achieve the European Union's target of generating 20% of its electricity from renewable sources by 2020.
"European wind farms' demand for copper will climb by 15 percent between 2013 and 2015", estimates Wood Mackenzie.
Moreover, says Barclays Capital, as offshore wind turbines gain preference over the onshore variety, so copper demand will rise per unit of delivered electricity. Turbines located at sea require 31 tonnes of copper per unit; onshore plants need only half that amount.
Which mining companies stand most to benefit from this projected rise in copper demand?
(It's a boost the industry sorely needs, especially as Chinese purchases of the metal were expected this week to slump to a 9-month low [cityAM, 30 August 2012]).
Back in the black?
According to data from CRU International (updated in August 2012) the world's ten leading producers of copper during 2011 were:
1) Codelco (Chile, state-owned): at 1,809, 000 tonnes
2) Freeport-McMoran (USA-UK-Australia): 1,346,000 te *
3) BHP Billiton (Australia-UK): 1,054,000 te
4) Xstrata (UK-Switzerland): 884,000 te
5) Grupo Mexico (Mexico): 651,000 te
6) Anglo American (UK): 617,000 te
7) SCC (owned by Grupo Mexico): 593,000 te
8) Rio Tinto (UK-Australia): 552,000 te
9) Glencore (UK- Switzerland): 539,000 te **
10) Antofagasta (UK) 449,000 te
* Rio Tinto is entitled to 40% of output from FreeportMcMoran's vast Grasberg copper-gold mine in Papua
** Glencore is also the world's biggest private copper trading company
A quick glance at this list shows that copper companies with a primary listing in London are likely to come off best, should Wood Mackenzie's predictions for the EU be borne out.
That's unless Europe's powerful green lobbyists finally get their own analyses and acts together, calling this bullish scenario into severe question on social and environmental grounds.
Unfortunately, at present, that doesn't seem very likely. (See for example: "German cabinet passes draft law on offshore wind", cited below) .
Meanwhile, the copper miners are doubtless gearing up to re-present themselves as indispensable to the promotion of sustainable energy.
Despite the numerous disasters, land and livelihood destruction, toxic impacts and community outrages, associated with mining and processing of the red metal.
It's not only new markets for wind-sourced energy which could substantially boost copper's fortunes in the near-term.
Ernst & Young says that every "hybrid" battery car now contains roughly 34 kg of copper , as against 19 kg used in the average fuel-burning car.
According to research firm Frost & Sullivan, the annual growth rate in production of hybrid vehicles will mount - more than sixfold - to over half a million cars in 2017.
Thus, copper demand will correspondingly increase to more than 170 million kgs (170,000 tonnes) a year. ***
*** Data produced by the International Copper Study Group (ICSG) shows that, between January and May this year, global copper mine production stood at 6,661,000 tonnes, while refined usage was 8,685,000 tonnes.
[London Calling is published by Nostromo Research. Comments made in this column do not necessarily represent the opinions of any other party or person. Reproduction, with acknowledgment, is welcomed under a Creative Commons licence].
Glimmer of hope for copper from Europe green energy target
By Harpreet Bhal
30 August 2012
Expected growth in Europe's generation of renewable energy offers hope for copper demand, helping to offset a lack of appetite from builders and other traditional industrial users as economies slow.
Green energy projects such as wind farms, which use large amounts of copper, are set to grow as countries aim to meet a European Union target to obtain 20 percent of power from renewable sources by 2020.
Consultancy Wood Mackenzie estimated that European wind farms' demand for copper will climb by 15 percent between 2013 and 2015.
"That (renewable energy) part of copper consumption is going to grow ... and will be a long-term growth area as well," said Gayle Berry, analyst at Barclays Capital.
"Is it going to offset the weakness in export demand for a country like Germany or construction demand for a country like Spain? I highly doubt it. But it is certainly part of a longer-term picture of being an area of growth for European demand."
European copper demand is expected to contract this year, the International Copper Study Group said in April, the latest statistics available. In 2011, global demand growth slowed to 2.5 percent from 2.7 percent in 2010.
Last year, European wind farms needed only 37,000 metric tons (40,786 tons) of copper out of regional demand of 4 million metric tons, according to Wood Mackenzie, but this is set to grow.
In Germany, Europe's biggest economy and power user, renewable electricity generation hit a new record in the first half of 2012 at 67.9 billion kilowatt hours, an increase of 19.5 percent from the same period last year.
The German government also has given priority status to the building of 1,834 km of transmission lines to carry electricity from sources such as offshore wind parks. Copper is used extensively in power cables and wiring.
Britain, the Nordic region and Spain are also fast expanding their wind power capacity.
"Northern Europe is not very sunny, so wind power is quite well placed to meet this," said Ian Littlewood, a research analyst at Wood Mackenzie.
In wind turbines, copper wires are used to carry electricity to substations and connect the system to the grid. For offshore farms that require undersea cabling, the amount of copper needed is even greater.
Onshore wind turbines each require 16 metric tons of copper and offshore turbines 31 metric tons, according to Barclays Capital.
Another growth area will be hybrid vehicles. Each hybrid car contains roughly 34 kg of copper versus 19 kg in the average fuel-burning car, according to Ernst & Young.
In the EU, the annual growth rate of hybrid vehicles will rise by more than six times to above 500,000 cars in 2017, research firm Frost & Sullivan has predicted.
"As we move to better technologies in terms of emissions control and environmentally responsible motoring, there will be a concomitant increase in demand for copper," said David Russell, director of global resources at Ernst & Young.
"And as we pull ourselves gradually out of a recession the demand for these vehicles will grow and ... the implication for future demand from the automobile sector is very positive."
(Editing by Jane Baird)
German cabinet passes draft law on offshore wind
By Madeline Chambers
30 August 2012
German Chancellor Angela Merkel's cabinet approved a draft law on Wednesday to accelerate the expansion of offshore windparks, a crucial part of a planned shift to green energy from nuclear.
While Germany is making headway with its renewables targets due to rapid growth in the solar and onshore wind sectors, progress on offshore wind has been slower because of higher than expected costs and questions over liability.
The draft law aims to overcome some of the risks linked to building wind platforms at sea, which has deterred potential investors, by passing some of the cost to consumers.
Originally, grid firms responsible for building cables from the windparks to the mainland were supposed to compensate plant operators for failures in the connections.
Such risks were too great for companies such as Dutch TenneT which has run into major problems with its connections from offshore plants to the German network.
The new law imposes an extra charge on consumers - average households will pay about 10 euros a year, amounting to a total of about 750 million euros.
"The energy switch is a huge, long-term project which demands all our efforts and it cannot be completed without a cost. The new rules ensure there is a fair distribution of the burden," said Economy Minister Philipp Roesler.
The law, due to take effect later this year, also gives more leeway to grid operators such as TenneT and 50Hertz, jointly owned by Belgium's Elia and Australian Industry Funds Management (IFM), to determine connection dates.
Germany's grid agency head Jochen Homann told Reuters sharing liability between the various parties was the only way to secure the investment needed in the offshore branch.
"But even more important is the offshore grid plan, which will give grid operators reliable information on which parks must be connected and when," said Homann.
The proposal is designed to ensure Europe's biggest economy can meet its goal of installing more than 10,000 megawatts (MW) of offshore capacity by 2020, and 25,000 MW by 2030, to replace 20,500 MW in nuclear capacity gone by the end of 2022.
So far only about 550 MW in offshore capacity has been installed, according to Germany's grid agency. However, Homann said the government's goal was still realistic.
Firms have welcomed the new law but say more needs to be done to get the power grid connected to offshore turbines and that the complicated bureaucracy linked to the construction of wind parks needs to be simplified further.
The VKU association of municipal utilities supported the plans which it said provided some security for investors in offshore turbines.
"Lawmakers must, however, make sure that small users are not burdened with extra costs" said the VKU.
The offshore sector has expanded faster in Denmark and Britain but the platforms off Germany are being built further away from the coast and in deeper water, making the upfront financing even greater.
Germany aims to derive at least 35 percent of its power from renewable sources by 2020 from 25 percent, rising to 80 percent by 2050, the bulk of which is due to come from offshore wind.
However, Altmaier has suggested Germany may have to slow down its "green revolution" due to the high costs involved which are being passed on to consumers.
Sources in the renewable sector say the government, worried about a big hike in consumers' electricity bills a year before an election, may retreat on its targets for offshore.
(Additional reporting by Christoph Steitz, Andreas Rinke, Vera Eckert.; Editing by Gareth Jones and William Hardy)