Copper and Silver Demand Set to Surge Amid Supply Deficits

• Copper demand is surging due to increased use in renewable energy infrastructure and electric vehicles. Supply is struggling to keep up, with a major deficit expected by 2025.
• Silver demand is also rising rapidly, especially for solar panels, EVs, and 5G technology. But supply has stagnated, creating the largest silver market deficit in decades.
• By 2030, EV demand in the US and Europe alone could require over 5 million tonnes of copper and 2.5 billion ounces of silver.
• Solar power growth could see silver demand reach 500 million ounces annually by 2050, nearly half of total current demand.
• With supply unable to match demand growth, copper and silver face severe shortages in the coming years, presenting opportunities for investors.

The global transition towards renewable energy and electric transportation is fueling a massive increase in demand for copper and silver. However, the supply of these essential metals is struggling to keep pace, setting the stage for significant market deficits in the coming years. Prudent investors may want to take note of the projected supply shortages, as they present potential opportunities in copper and silver investments.

Copper Charges Towards a Substantial Shortfall

Copper plays an indispensable role in our electrified economy. The conductive metal is an essential component of the infrastructure needed for power generation, transmission, and usage. With global efforts to transition away from fossil fuels and combat climate change, copper has become more critical than ever.

Renewable energy systems like solar, wind, and energy storage require substantial amounts of copper. Electric vehicles can contain up to three times more copper than internal combustion engine vehicles. Even the push towards greater electrification of products, appliances, and buildings is driving copper demand higher. This surge in usage has copper racing towards a major supply deficit within the next few years. Consulting firm McKinsey forecasts a 6.5 million ton annual shortfall by 2030. BloombergNEF predicts copper demand will increase by over 50% between 2022 and 2040.

The International Energy Agency says with current mines and projects, the expected copper supply will only meet 80% of demand by the end of this decade. The situation appears primed to strain global copper supplies to their breaking point.

Charging Infrastructure Highlights Copper's Importance

One area that highlights copper's integral role in electrification is the expansion of EV charging infrastructure. Electric vehicles themselves require significant copper usage. But the charging stations that must be built to support them only multiply this demand. To meet the rapid growth in EVs, experts estimate over one million new public charging stations will be needed in the United States by 2030. Each station can utilize between 0.7 to 8 kg of copper, depending on charging speed.

President Biden has set a national goal of 500,000 public chargers by 2030. If met, that target alone would need approximately 600,000 kg of copper, or 600 tonnes, just for the stations themselves. But forecasts say the number of EV charging outlets must actually triple in the US by 2025 compared to today. And by 2030, the country will require up to 2.13 million Level 2 and 172,000 Level 3 fast charging stations.

At that scale, the charging infrastructure in the US would demand over 15,000 tonnes of copper to build. That's equivalent to roughly 10% of the country's total copper production in 2022.

Wind and Solar Demand Keep Copper Usage Climbing

Charging stations are only part of the picture. The renewable energy projects powering this new infrastructure will also drive copper demand higher.

Onshore wind turbines can utilize around 5 tonnes of copper per megawatt. Offshore turbines demand over 20 tonnes per megawatt. To meet global renewable energy goals, wind capacity is projected to grow rapidly over the next decade. Solar photovoltaic systems are also copper-intensive. Solar farms can require around 6 tonnes of copper per megawatt installed. One estimate shows North American solar power growth needing nearly 900,000 tonnes of copper through 2027 - equal to Australia's total 2022 output.

With some renewable energy installations being developed on the gigawatt scale, a single massive project could end up demanding several tens of thousands of tonnes of copper all on its own.

5 Million Tonnes for US and European EVs by 2030

Looking at the automotive market more broadly, the expected EV boom only expands copper requirements exponentially. There are currently around 16 million EVs on roads globally, consuming about 1.4 million tonnes of copper. But forecasts suggest the number could rise to 145 million by 2030.

Based on average copper content, that would equate to over 12 million tonnes demanded just for those EVs. Even accounting for lighter-weight EVs over time, copper demand will likely still reach 8-10 million tonnes for the global light-duty EV fleet.

In the US, recent projections estimate 28 million EVs by 2030. At 85kg per vehicle, that's nearly 2.5 million tonnes of copper demand from American EVs alone. In Europe, 30 million EVs are expected by the end of the decade. With regulations favoring larger vehicle sizes, European EVs may average around 100kg of copper each. That adds up to a 3 million tonne demand from the continent. Combined, the US and Europe could be looking at over 5 million tonnes of copper required just for electric cars and trucks. Such a figure begins to expose how precarious the copper supply picture is becoming.

Silver Races Towards Its Biggest Deficit on Record

Like copper, silver is increasingly in demand for renewable energy systems and electric vehicles. As the most electrically conductive metal, silver enables efficient transmission of electricity in these applications.

Global silver demand has jumped 38% since 2020 as the world continues recovering from COVID-19's economic impacts. This dramatic rise comes amid a relatively stagnant mine supply, stretching the silver market into a significant deficit.

In 2022, the global silver deficit hit 237.7 million ounces, possibly the largest on record. It took just two years of undersupply to erase the surpluses of the prior decade. The shortfalls look set to continue, heralding a new paradigm of persistent deficits.

Solar Demand Soaring

One key driver of silver demand is photovoltaic solar power. As a conductive metal, silver is extremely well-suited for solar panels, allowing efficient conversion of sunlight into electricity.

Last year, silver demand from solar PV climbed 15% to 140 million ounces. It is forecast to jump another 28% in 2023 to around 161 million ounces. The longer-term demand picture is even more dramatic. Based on projections for massive growth in solar capacity to meet renewable energy goals, annual silver demand from this segment could eventually hit 500 million ounces by 2050. With total annual silver demand around 1.2 billion ounces currently, solar alone could account for nearly half of total demand by mid-century.

Advancing solar panel technology that utilizes more silver per watt only expands this demand growth. Supply shortfalls for the metal look nearly inevitable given its sizable role in the exponentially expanding solar industry.

EVs Revving Up Silver Demand

Though not utilized in batteries, silver is increasingly in demand for electric vehicles. Silver's unmatched conductivity and efficiency for electrical transmission make it critical for the intricate circuitry in EVs.

Battery electric vehicles can contain up to twice as much silver as internal combustion engine vehicles. Autonomous EVs demand even more silver due to their complexity. The Silver Institute forecasts automotive industry demand growing from around 90 million ounces today to nearly 200 million ounces by 2030. That would represent over 15% of total silver demand.

Charging infrastructure for EVs is another area that will significantly increase silver requirements in the coming years. With growth measured in the millions of stations globally, silver will be essential to transmitting and distributing their electrical loads efficiently.

Silver's Multiplying Industrial Applications

Beyond solar panels and EVs, silver's unique properties have it in increasing demand across a range of industrial applications.

5G communications technology will double silver demand from around 8 million ounces today to 16 million ounces by 2025. Continued 5G buildouts could push this figure to over 20 million ounces before 2030. Silver use in brazing and soldering applications is also forecast to climb 20% in the next decade, from 50 million ounces to nearly 60 million ounces per year. Printed and flexible electronics, a key component of sensors, mobile devices, and consumer tech, is another segment poised to raise its silver demand by over 50% in the 2020s.

Prudent Investors Should Monitor Supply Trends

The forces driving copper and silver demand higher show no signs of abating. Renewable energy systems, electric vehicles, electronics, and more will continue needing substantial amounts of these essential conductive metals.

Meanwhile, stagnant mine supply and limited new projects threaten significant deficits for both metals in the coming years. By tracking supply dynamics, wise investors can identify potential opportunities arising from the supply shortfalls in copper and silver.