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woodmac.com Trusted commercial intelligence

October 2017

Copper opportunities in low carbon megatrends

Richard Wilson

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Legal Statement

The purpose of the information in the following presentations is to guide

ICA programs and provide members with information to make independent

business decisions.

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Antitrust Guidelines for Copper Industry

Trade Association Meetings

The following guidelines with respect to compliance with antitrust laws of the United States, Japan and European Community1 are intended

to govern the conduct of participants in copper industry trade association meetings, both at the meeting itself and in informal discussions

before or after the formal meeting.

Price: Competitors should not discuss future prices (including terms of sale) of their products. There is no blanket prohibition against the

mention of or reference to current or past prices but limits must be observed. Such references or mentions should occur only when

necessary in connection with the development of association programs. For example, reference to a particular price level in comparing the

cost of a copper product to a competing product is permitted. Whenever possible, such references should be discussed in advance with

legal counsel.

Competitive Information: Competitors should not discuss the market share of a particular copper producer or copper fabricator’s

products. Furthermore, nothing should be said at a meeting which could be interpreted as suggesting prearranged market shares for such

products or producer production levels. The overall market share of copper products may be discussed with regard to competition with non-

copper products and general market acceptance.

New Products: Competitors should not encourage or discourage the introduction of a new product by another competitor or reveal a

particular copper company’s plans to change the production rate of an existing product or to introduce a new product. No company should

disclose to another company whether it is in a position to make or market a new product. New products may be discussed in a technical

manner or from the standpoints of competition with non-copper products and general market acceptance.

In addition, proposed methods for and results of field and laboratory testing can be considered.

The Role of Legal Counsel: Legal counsel attends association meetings to advise association staff and other meeting attendees

regarding the antitrust laws and to see that none of the matters discussed or materials distributed raise even the appearance of antitrust

improprieties. During the course of a meeting, if counsel believes that the discussion is turning to a sensitive or inappropriate subject,

counsel will express that belief and request that the attendees return the discussion to a less sensitive area.

A paper entitled ‘Copper Industry Trade Associations and Antritrust Laws’ is available upon request. 10/92, 5/93, 10/10

1. Other foreign competition laws apply to International Copper Association, Ltd. (ICA)’s activities worldwide.

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This report analyses copper demand from three sectors linked to decarbonisation trends

The report has been compiled by Wood Mackenzie and MetalsPlus

Renewable Energy

1. Solar

2. Wind

Electromobility

1. Electric vehicles

2. Charging Infrastructure

Energy Efficiency

1. Electric motors

2. Distribution Transformers

3. Air conditioners

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Typical wind and solar copper intensities by installation type

Wind power notably involves high levels of copper intensity of use with the transformer and cabling

Ground mounted utility solar uses more copper roof mounted types, but has also experienced more substitution from aluminium

Offshore wind involves higher

copper intensity per MW owing

to the greater amount of

cabling required

Rooftop solar typically use

copper wiring for all DC wiring

» However, limited interconnection

means they use less copper

relative to utility ground mount

solar

Utility solar historically used up

to 6 t Cu per MW but

substitution from aluminium has

reduced the intensity over time

On average, wind is much

higher than traditional coal fired

power at 1 – 2 t Cu per MW

5.35

15.3

0.51 0.54 1.43 1.38

3.26

OnshoreWind

OffshoreWind

ResidentialSolar

CommercialSolar

UtilityString

InverterSolar

UtilityCentralInverterSolar

UtilityCentralInverterSolar*

Copper

inte

nsity

(t C

u /

MW

)

*Japan and South Korea

Source: Wood Mackenzie Rooftop Ground Mount 5

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Solar power generation capacity by region

Global solar and wind power will each account for over 1 TW of capacity by 2035

Asia, particularly China, drives rapid near and mid term growth due to falling technology costs, policy incentives and development of transmission infrastructure

Source: Wood Mackenzie

Wind power generation capacity by region

0%

5%

10%

15%

20%

25%

30%

35%

0

200

400

600

800

1,000

1,200

2015 2020 2025 2030 2035

YO

Y g

lobal %

change

Genera

tion C

apacity (

GW

)

Asia Europe

North America ROW

YOY global % change

0%

2%

4%

6%

8%

10%

12%

0

200

400

600

800

1,000

1,200

2015 2020 2025 2030 2035

YO

Y g

lobal %

change

Genera

tion C

apacity (

GW

)

Asia Europe

North America ROW

YOY global % change

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Forecast global copper demand from

installed solar power

Rapid growth of wind power installations consume on average 359 ktpa of copper up to 2020 and 339 ktpa to 2025

The contributions from solar installations is more modest, owing to the lower copper intensity, averaging ~50 ktpa through the Base Case forecast period

Source: MAKE, Wood Mackenzie

Forecast global copper demand from

installed wind power

Gradual slowing of installed capacity and

copper demand due to maturing

renewables growth in our Base Case

scenario 59.2

39.2

43.8

49.3

3.2

2.7

2.8

2.6

2.5

2.3

2.6

2.8

0

10

20

30

40

50

60

70

2016 2018 2020 2022 2024 2026 2028 2030 2032 2034

Coppe D

em

and (

kt)

Utility Commercial Residential

276

197

198

163

66 163

142

125

0

50

100

150

200

250

300

350

400

450

2016 2018 2020 2022 2024 2026 2028 2030 2032 2034

Copper

Dem

and (

kt)

Onshore Offshore

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Component

Passenger Light Commercial Vehicles

Heavy

Commercial

Vehicles

ICE HEV PHEV BEV ICE HEV PHEV BEV ICE BEV Bus

Battery1 1 15 38 5 32 60 173

Rest of Vehicle 22 39 40 42 26 47 48 50 42 80

Total 22 40 55 80 26 52 80 110 42 253

Copper use in batteries increases copper intensity for electric vehicles over internal combustion engine vehicles

The use of copper in electric motors is another notable contribution to increased intensity of use

1The copper content of an average sized battery for the particular propulsion type has been used

Source: Wood Mackenzie, IDTechEx

Copper intensity per vehicle (kg) by type

Battery contributes significantly to higher copper intensity moving from ICE through to EV

Higher the copper usage within the rest of the vehicle are largely attributable to the electric motor

windings and the wiring harness/electrical distribution system (to accommodate higher voltages)

Aside from additional electrical components, the need for improved heat exchanger equipment to

deal with higher running temperatures also serves to boost copper consumption in xEV

There are some losses in engine hardware in BEV versus ICE/HEV/PHEV as no combusting engine

is incorporated, however these are small overall and comfortably outweighed by gains elsewhere

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WM passenger EV forecast (base case), 2015 - 2035

WM expects EVs to account for 34% of global passenger vehicle sales by 2035 with over 50% being hybrid types

The split of EV type is heavily dependent on region – a BEV is not currently viable in regions with limited charging infrastructure

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

5

10

15

20

25

30

35

2015 2020 2025 2030 2035

Mill

ion v

ehic

le s

ale

s

HEV PHEV BEV % sales EV

Source: Wood Mackenzie

Uptake of EVs is dependent

on:

» Regional policy & subsidies

» Battery, oil & electricity prices

» Vehicle range and cost

» Infrastructure

» Vehicle stock saturation

China has had the latest surge

in electric vehicle sales with

strong government subsidies

» Growth will continue to come from

Europe, US and developed Asian

markets

Overall HEVs are the preferred

vehicle type as they do not

have the price tag of a

BEV/PHEV and do not require

infrastructure, while offering the

consumer a more efficient,

environmentally friendly option

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0

500

1000

1500

2000

2500

3000

3500

4000

2015 2020 2025 2030 2035

kt C

u

ICE HEV PHEV BEV

13%

12%

20%

CAGR 2016-35

0.1%

Copper demand from passenger car EVs overtakes ICE vehicles after 2033, accounting for over 1.9 million tonnes by 2035

The offset from fewer ICE sales through the forecast is minimised due to the much lower copper intensity

Source: Wood Mackenzie

Passenger car copper demand by vehicle type, 2017 - 2035

By 2029, BEV/PHEV copper demand

becomes larger than HEV demand

and by 2033, EVs in total will

consume more copper than ICE

vehicles

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Breakdown of Electricity Generation, Consumption and

Losses

The three energy efficiency sectors are major sources of generated electricity loss Reducing electricity loss in major consuming sectors is therefore a major area of

importance for carbon emission reductions

Source: MetalsPlus, IEA 2011

From generation to use

about 17% of electricity is

lost, much of it from

network transformers

In use, motors and motor

driven systems account for

45% of all electricity use,

and a similar share of loss

Air conditioners are a major

application for electric

motors

Electricity

Production

100%

Losses

17%

Electricity

Consumption

83%

Other Uses

Electric Motors

45%

Energy Losses

Energy Used

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Energy efficiency is enforced through minimum energy performance standards (MEPS) which are present in most major markets

MEPS are the key to product upgrades and most developed regions have them in place, although developing markets are where the future gains will be made

Source: MetalsPlus

MEP Presence by Country and Sector

Motors

Refrigerators Transformers

Air Conditioners

Voluntary

No Policy or no data

Mandatory

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Copper intensity per unit of capacity increases for all sectors, as efficiency gains require higher material intensity Copper in energy efficiency sectors is mainly present as winding wire and additional tubing for air conditioners, and more copper will be required per unit to achieve higher efficiency

Source: MetalsPlus

Copper

forms

Copper

Intensity Distribution Transformers

Electric motors

Air Conditioners

0.70

0.75

0.80

0.85

0.90

2005 2010 2015 2020 2025 2030 2035

kg C

u /

kV

A

Copper Tube Winding Wire Other Forms

0.6

0.7

0.8

0.9

1.0

1.1

2005 2010 2015 2020 2025 2030 2035

Kg C

u /

kW

1.5

1.7

1.9

2.1

2.3

2.5

2005 2010 2015 2020 2025 2030 2035

kg C

u/ kW

Sectors

0.4%

CAGR

2017-35

0.3%

0.2%

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Copper demand by energy efficiency sector

Copper demand in energy efficiency sectors almost doubles from 4.7 Mt in 2017 to reach 9.7 Mt by 2035

Increases in stock added and replacement, particularly in India and Other Asia, drives growth at CAGR of 4.0%, 3.9% and 4.3% for transformers, motors and AC respectively

Source: MetalsPlus

Global distribution of copper demand for

energy efficiency sectors

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20

05

20

07

20

09

20

11

20

13

20

15

20

17

20

19

20

21

20

23

20

25

20

27

20

29

20

31

20

33

20

35

Latin America

North America

Other Asia &Oceania

China

India

Other Europe &Africa

European Union

kt

Cu

865

1,842

1,843

3,859 1,823

4,029

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2005 2010 2015 2020 2025 2030 2035

Distribution Transformers Electric Motors Air Conditioners

kt C

u

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The energy efficiency sector will contribute most to copper demand for the megatrends analysed but electromobility grows faster Energy efficiency contributes 80% of demand but the rapid growth in electric vehicle production sees electromobility increases at 14.2% CAGR vs 4.1% for energy efficiency

Source: Wood Mackenzie, MetalsPlus

Forecast copper demand by sector

4,531 5,436

6,611

7,983

9,730

223

542

1,043

1,834

2,767

406

415

404

390

344

5,161

6,394

8,059

10,207

12,840

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Copper

Dem

and (

kt)

Energy Efficiency Electromobility Renewables Total

-0.9%

14%

4.9%

CAGR 2016-35

4.1%

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Disclaimer

Confidential

This report has been prepared for International Copper Association by Wood Mackenzie

Limited. The report is intended solely for the benefit of International Copper Association and

its contents and conclusions are confidential and may not be disclosed to any other persons

or companies without Wood Mackenzie’s prior written permission.

The information upon which this report is based has either been supplied to us by

International Copper Association or comes from our own experience, knowledge and

databases. The opinions expressed in this report are those of Wood Mackenzie. They have

been arrived at following careful consideration and enquiry but we do not guarantee their

fairness, completeness or accuracy. The opinions, as of this date, are subject to change.

We do not accept any liability for your reliance upon them.

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