Two Sides of the Copper Coin
01 Mar 2023
Copper
prices have surged by almost 33% since mid-2022, driven by the anticipation of
a demand revival in China, with 1-month futures trading at slightly above
$9,000 per tonne. The supply of copper is constrained by instability and
insufficient transport infrastructure and safety in significant
copper-producing countries like Mongolia and the Democratic Republic of Congo,
while Peru, which supplies 10% of the world's copper, has been hit by an
upsurge in protests this year.
Looking ahead, the
shift towards renewable energy will result in electricity being generated in
remote areas with low land values due to the diffuse nature of renewable
energy, which requires vast space to harness. However, this green energy will
be consumed in densely populated urban areas and industrial hubs. For instance,
in South Africa, coastal wind farms and Karoo solar farms will provide power to
the industrialised highveld and Gauteng's economic heartland. In Germany, wind
energy is being generated on the northern coastline, while the manufacturing
centres are situated in the central and southern regions of the country.
Renewable energy production in the United States is being established in the
Midwest, while most industry is located on the coasts and the Great Lakes.
As a result, there
will be a need for the construction of hundreds of thousands of kilometres of
new transmission lines in the next decade, often backed by generous green
subsidies to offset the economic inefficiencies of the setup. These
transmission lines will require substantial quantities of copper, and investors
with long-term strategies are expected to include mines and manufacturers with
copper exposure in their portfolios in anticipation of the demand for copper
rising as it is employed in power lines and other components of future green
infrastructure.
~ Source: Centre
for Risk Analysis
However, for South
Africans, higher copper prices also mean a rise in cable theft.
Copper theft has
resulted in an estimated economic damage of over R45 billion annually in South
Africa. According to the Economic Sabotage of Critical Infrastructure (ESCI)
Forum, copper theft costs across various entities including Transnet, Eskom,
Passenger Rail Agency of SA (PRASA), and municipalities amounted to R46.5
billion in April 2022. The forum, led by the group chief executives of Eskom,
Prasa, Telkom, and Transnet, hosted a round table discussion to find solutions
and discuss progress in tackling the challenge of theft and vandalism of
economic infrastructure. The length of cable stolen from Transnet's lines has
risen six-fold from 2017 to 2021, resulting in increased tonnage and revenue
losses, and increased repair costs. The establishment of a Multi-Disciplinary
Economic Infrastructure Task Team and the requirement for scrap metal dealers
and recyclers to register under the Second-Hand Goods Act, 2009, are among the
efforts to combat copper theft in South Africa. The Department of Trade, Industry
and Competition has also published draft policy proposals to restrict and
regulate trade in waste, scrap, and semi-finished metals to limit damage to
infrastructure and the economy.