Copper And Lithium Compete For The Title Of ‘New Oil’

Oil remains king of the energy sector, for now, but there’s a conga line of pretenders poised to claim the crown including copper which Goldman Sachs hailed last week as “the new oil”.

The reasoning of analysts at the investment bank is that copper will play a key role in the rush to replace vehicles with internal combustion engines with electric vehicles (EVs) as well as being essential in everything else which uses electricity.

Whether it’s going too far to award copper the title of commodity king is debatable, but what’s not arguable is that another metal has also been nominated as top dog in the energy world.

Lithium, a key ingredient in batteries, was actually named as “the white petroleum” several years ago in the first wave of enthusiasm for EVs.

Neither copper nor lithium will replace oil for a long time, though it is highly likely that as the rush to supersede fossil fuels with electricity produced and then stored in battery metals, oil will find itself under increasing pressure.

Compounding the threat to oil is an increase in government demands for a substantial reduction in environmentally damaging emissions caused by burning oil, coal and natural gas.

Pressure to suppress the use of oil is occurring just as the world’s mining industry rushes to fill the energy gap with copper, lithium and other battery metals such as graphite, manganese and vanadium.

Friedland Plays The National Security Card

At the same event that Goldman Sachs played its “copper is the new oil card”, a copper conference in Chile, another big name in the commodities world, Robert Friedland, upped the rhetoric by warning that access to copper and other raw materials was becoming a national security issue.

Friedland, who made his $1.8 billion fortune from mining investments, said that for the past 100 years wars had been fought over oil but hinted that future disputes could be over access to battery metals.

Supporting his warning is a steady rise in the price of copper which, at $4.29 a pound is close to a 10-year high, and within sight of its all-time high of $4.54/lb reached in 2011.

The price of lithium is also rising rapidly with spodumene (lithium ore) at $600 a ton, up 40% on last year’s average price and said by Goldman Sachs to be heading for $676/t next year and then up to $707/t in 2023.

Lithium hydroxide, one of the chemical forms of the metal preferred by battery makers, is trading around $11,250/t, up 13% on last year’s average of $9978/t but said by Goldman Sachs to be heading for $12,274 by the end of the year and then up to $15,000/t in 2023.

The prospect of a steep rise in the price of lithium has triggered a burst of corporate activity among lithium miners with the latest deal involving a merger of two Australian based producers of the metal.

Galaxy Resources and Orocobre have producing assets in Australia and Argentina and development projects in Canada and South America.

The combined company, which is yet to get a new name, will be the world’s fifth biggest producer of lithium with an estimated value of $3 billion.