Lithium and Copper Compete for the New Oil Title
Although oil remains the energy sector’s king for the time being, a conga line of pretenders is vying for the throne, including copper, which Goldman Sachs dubbed “the new oil” last week.
Copper, according to investment bank analysts, will be critical in the race to replace internal combustion engines in cars with electric motors (EVs), as well as in anything else that uses electricity.
Although it is debatable if copper deserves the title of commodity king, what is unarguable is that another metal has been nominated as the energy world’s top dog.
Lithium, a critical component of batteries, was dubbed “the white petroleum” during the initial wave of excitement for EVs many years ago.
Although neither copper nor lithium will ever completely replace oil, it is highly likely that as the race to replace fossil fuels with electricity produced and then stored in battery metals intensifies, oil will face increasing strain.
Complicating the oil challenge is a rise in government demands for significant reductions in the environmentally damaging pollution generated by oil, coal, and natural gas combustion.
Pressure to reduce oil consumption comes at a time when the global mining industry is rushing to fill the energy gap with copper, lithium, and other battery metals such as graphite, manganese, and vanadium.
Friedland Strikes Again With The National Security Card
At the same copper conference in Chile where Goldman Sachs played its “copper is the new oil” card, another prominent commodities figure, Robert Friedland, ratcheted up the rhetoric by warning that access to copper and other raw materials was becoming a national security problem.
Friedland, who amassed his $1.8 billion fortune through mining acquisitions, said that while wars have been fought over oil over the last century, he hinted that future conflicts could be fought over access to battery metals.
Copper’s steady rise to $4.29 per pound, close to a 10-year high, puts it within striking distance of the all-time high of $4.54/lb hit in 2011.
Lithium prices are also increasing steadily, with spodumene (lithium ore) trading at $600 per ton, up 40% from last year’s average and forecast by Goldman Sachs to reach $676/t next year and $707/t in 2023.
Lithium hydroxide, one of the chemical forms of the metal favored by battery manufacturers, is currently trading at about $11,250/t, up 13% from last year’s average of $9978/t, but is expected to reach $12,274 by the end of the year and then reach $15,000/t in 2023, according to Goldman Sachs.
The possibility of a sharp increase in the price of lithium has sparked a burst of corporate activity among lithium miners, with the most recent transaction involving the merger of two Australian lithium producers.
Galaxy Resources and Orocobre have operations in Australia and Argentina, respectively, as well as construction ventures in Canada and South America.
The merged company, which has not yet been given a name, will be the fifth largest lithium producer in the world, with an approximate market value of $3 billion.
