Element cascade: Aluminum and copper example
2021.05.24 – Ian Page
The CHON element cascade is based on the idea that as the MROI of extraction of an element drops, the price you can sell it for reaches a "cap" at which users can't make enough profit from using it to keep their businesses going and are forced to substitute either directly or in more holistic / systemic ways.
Many of these substitutions are surprising before the event, and I don’t know how to have a process to identify the specifics, however the general pattern is clear as are the endpoints which are CHON and Aluminum essentially.
The concentration of copper ores is dropping in all the major copper mines and is well below 1%. One commentator said that at 0.25% (some are close to that) reserves drop sharply. (There is a proposed new mine in the Congo with what is described as an " eye watering 6% ore quality" but it's not clear if this is real yet even if it is it will be some time before it produces even if it can overcome the complexities /cost of working in the political environment.
I wrote some time ago about the differences between the US and Europe during the copper crisis of the 70's in response to what was then an artificial copper shortage.
Aluminum replaced copper in many applications in Europe but not in the US and since substitution is often ergodic- it costs quite a lot to change supply chains and usage models, which creates considerable hysteresis effects and resistance to going back. In addition, often the substitution is found to have positive benefits once the transition is achieved providing no reason to go back.
Copper prices are rising now due to both ore quality costs, and reserve replacement costs- good new mine areas are hard to find , take a long time to develop the infrastructure , and a lot of investment to get up to speed so in general there is a period of negotiation to find long term takers for the output, get backers willing to accept a long return period and the risks that the mine will come on stream at the same time as lots of others and thus prices will drop below expected. The other aspect is that the great electricity transition is using a lot of copper which was not foreseen by the producers.
This note suggests that another shift to aluminum may be driven by copper prices but has a comment that aluminum is associated with CO2 emissions.
To give context to this bald journalistic statement, we must point out that 1. China uses coal to generate electricity for aluminum production - so they are right, but china intends to eliminate coal as fast as it can build renewables. because coal is an import despite their own immense production and thus an embarrassing strategic weakness. 2. Aluminum other than in China is usually produced using hydropower which is usually the cheapest. 3. While aluminum production involves electrolysis with sacrificial carbon anodes the major producers are following a direction to either use hydrogen or titanium electrodes to avoid this.
So, while today it's true that aluminum production produces CO2, it's fixable. Since aluminum has a long future, it’s worth fixing. It's also worth noting that aluminum is highly recyclable, and recycling involves much less electricity. Copper production also involves a lot of CO2 production. When low grade ore electrowinning is used it consumes a lot of electricity, usually diesel or coal based as well as some nasty chemicals. Much of this could also be fixed and some big mining companies are thinking about it, often to save money now that renewables are cheaper than diesel or coal particularly in remote or inaccessible sites, but if they see a future of decreasing copper production from a mine there is little motivation to invest rather than close down.
Copper clearly has many uses in which it is very valuable and can carry a higher price cap, but this is likely to be at reduced overall volume of production over time and this reduction would be accelerated if the copper price rises to trigger aluminum replacement.
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