Zero Emissions Creates Copper Price Volatility for Electrical Distributors
In the electrical distribution industry, copper pricing has always been volatile – especially in construction-oriented electrical distribution markets. And because copper is a key component of many electrical products, copper price fluctuations can affect commercial construction profitability significantly.
For decades, the US construction market was the driving force behind the copper market and its price variations. But the recent impact of China’s increasing demand for copper has added increased scarcity and price volatility to the cost of electrical components containing copper.
Now a third competitor with high demand for copper has entered the market: electric vehicle (EV) and alternative energy manufacturing. In this article the electrical distribution experts at Team Electrical Supply in the Detroit, MI area take a look at what this means for copper supply and cost issues in the long-term.
Outlook for Copper in the Electrical Distribution Industry
Copper is the primary metal used in electrification products. Examining copper’s long-term supply and demand outlook, experts are predicting some problems in the next ten years. They are estimating that copper demand will double over the next decade.
This skyrocketing demand for copper products is chiefly being driven by the move from petroleum to electrification as the global market’s primary energy source, as the world seeks to combat climate change. Both the international scientific community and the United Nations have set energy goals of net zero emissions by 2050.
But these zero-emission electrification technologies – including solar, wind, EV, etc. – will consume copper at exponentially increasing rates. Experts fear that copper demand will eventually outstrip supply, causing prices to escalate as availability becomes scarcer.
History of Copper Usage in the Electrical Distribution Industry
Statistics reveal a long-term rise in copper prices from the years 1975 through 2022. But a sustained occurrence of copper prices doubling is unprecedented. A potential doubling of copper usage could lead to a doubling of copper prices, which has serious ramifications for the electrical distribution market.
Experts estimate that copper wire and cable currently make up 10% to 15% of the total electrical distribution market. If the price of copper doubles, they project that the electrical distribution copper wire market will grow from a current estimate of 14 to 20 billion dollars to 28 to 40 billion dollars within the next ten years.
Forecasted Copper Usage in the Electrical Distribution Industry
Offshore and onshore wind, tidal power, solar energy, biomass, geothermal energy, bioenergy, electric grid, nuclear, hydro, and battery storage will all contribute to increasingly heavy demand for copper in the electrical distribution industry in the coming years.
Additionally, electric vehicles (EV) consume eight to ten times the amount of copper that a combustion engine uses. These “new users” of copper will become competitors for the current copper supply which is currently mainly construction-driven in the electrical distribution market.
This increased demand, coupled with less supply, results in price increases by the mines and manufacturers – which is then passed to distributors and contractors – hence making electrical projects more expensive.
Implications for Electrical Distributors
The takeaway is that the electrical distribution industry is ushering in a major economic transition. As electrification becomes the country’s (and the world’s) primary energy source electrical distributor, contractors and anyone else in the energy sector needs to remain aware of what is happening.
Experts remind that it is important to continue to price average inventory and maintain high turns with “tight inventory management”, buying and selling at market price. And as copper prices continue to increase in the next decade, distributor and consumers are warned to expect market changes and budget accordingly.
Industrial reshoring, sustainable energy growth, and government investments into climate-change technologies means this copper supply and demand issue is inevitable.
Electrical Distribution & Supply | Detroit, MI
As always, Team Electrical Supply remains your electrical distribution partner in the Detroit, Michigan area. We keep our finger on the pulse of changes and developments in the electrical supply industry to ensure that our customers always have the electrical products they need at prices they can afford.