The clean energy transition keeps gathering momentum. The ultimate shift from fossil fuels to clean energy sources is a multibillion-dollar trend already.
Almost every week, key players release news in support of this shift.
Every announcement is a signal for investors of all calibers. Major businesses, governments, and retail investors are piling up billions of dollars to get their stake in this early-stage opportunity.
Smart investors follow the money and invest alongside the major players.
Last week, Redwood Materials, a recycling company, received massive support from the White House. The US government approved $2 billion in funding for a recycling complex in Nevada.
The funding will cover a large part of the complex’s $3.5-billion capital cost. Which, in turn, will help secure the domestic supply of critical elements.
That’s the main goal for most economies – to secure the domestic supply of critical metals. This will limit dependence on foreign supply sources.
No outrageous tariffs or trade bans will stand in the way of the clean energy transition. As a result, it will directly impact future economic growth.
Major developed economies provide strong support for new ventures. New battery plants, mines, industrial energy storage, and more will drive global economies in the decades to come.
The White House already pledged almost $35 billion from its recent Inflation Reduction Act (IRA). And it will likely keep up the pace and fund more ventures in the clean energy field.
At the same time, businesses are also making green energy their priority. Ford has outlined at least $50 billion in the funding of transition to the new generation of electric vehicles (EVs).
The company teamed up with battery maker CATL to build a new battery plant in Michigan. It will create over 2,500 jobs and help the automaker stay relevant in the EV market.
LG Chem, a major battery maker, has committed to investing directly in mining operations. Funding the very bottom of the supply chain just to secure its future supply. The company’s CEO perfectly outlined the company’s strategy and priorities in a recent interview with Bloomberg:
“We are preparing ourselves first of all to secure supply of raw material, which is more important than the price.”
With this approach, nothing can stop the clean energy transition… and the money flow in the sector.
Major Deficit Is Looming for This Metal
Most metals involved in the clean energy transition are in high demand right now.
This applies to lithium, vanadium, cobalt, and other high-tech minerals. Yet, investors often forget about some basic metals.
And here is the problem…
Metals such as copper and nickel have a lot of industrial uses. They go into wires and steel products… So not many expect these to be vital for the clean energy transition.
And they are dead wrong.
A typical EV requires over 145 pounds of copper. That’s 2.2x more than a fossil-fueled car requires today.
As a result, we’ll see a massive surge in demand for copper. S&P Global estimates that the world will double its copper consumption by 2035.
The research agency outlines the need for 50 million tons of copper per year in roughly a decade. And supply, so far, is lagging behind this target.
S&P Global projected up to 20% deficit in the copper market. That’s a possible deficit of 10 million tons per year.
Goldman Sachs projected the need for a $150-billion investment in the copper sector over the next decade. This is the only way the industry can stay afloat, and major economies can reach their clean transition targets.
With such a tight supply, final users will chase every pound of copper available. They will likely pay a premium – just to secure future supply and meet their production targets.
The looming deficit and strong demand from the industry create a perfect setup for copper.
Make sure you put this trend on your radar.
Thank you for your loyal readership,
The Financial Star team