“William Cornell Greene, like all the other copper millionaires, owed his prosperity to Thomas E. Edison. When the great investor finally made his electric lamp work on October 21, 1879, he opened the door to a new age, the Age of Electricity. As his lights winked on all over the country and copper power lines sprouted along the highways, American industry began to be copper oriented and copper hungry.”
Those are the opening words from Arizona historian C.L. Sonnichsen’s fascinating novel, Colonel Greene And The Copper Skyrocket, a true story about the spectacular rise and fall of a Copper King, Cattle Baron and Promoter Extraordinary.
One can only imagine what the refiners of oil thought of the electric light bulb in 1879. My guess is not much. Often forgotten by those that follow energy, is that in the early days of oil, the principle application was for illumination, disrupting another one of America’s most important industries, Whaling.
In the 1800s whale oil was the lubricant and illuminate of the American economy. So important was whaling, it is said that it was the 4th or 5th most important industry in the nation. With continued discoveries of oil in the mid to late 1800s, industrialists would begin refining oil at commercial scale into illuminates like kerosene, while throwing away by-products like gasoline that had limited utility at that point.
So it can be submitted that in a rather short period of corporate time – 20 years or so – petroleum oil would supplant whale oil. This would be followed by the magnificence of electrification supplanting kerosene as the safest, cheapest, easiest illuminate. Where would the world’s richest man at the time, John D. Rockefeller, find a new demand source for his vast refining and distribution network? As you already know, it would come with the internal combustion engine.
All this preamble should be very important to anyone who follows or invests in energy. Why? Simply put, today, only 19% of final energy usage is electrification. By any measure or prognostication this number is going to climb to over 50% in the next thirty or forty years. Consider that for a moment. What took humanity over 120 years will be tripled in the next few business cycles.
Even more importantly, the type of electrification that will increasingly become part of society is far more copper intensive than Thomas Edison’s Electrification 1.0. When transportation is electrified it takes on average 4X more copper, solar and wind power 4X to 6X more copper and off-shore wind power takes a staggering 10X more copper for each new MW of generating capacity.
On my recent five continents in three weeks speaking tour, I had the opportunity to share ideas with many investors and decision makers related to these trends. I can comfortably share with you that the role copper plays in the future of energy is a very under-researched (and under-appreciated) theme. Almost everyone is fixated on trade war tariffs or the Chinese economy imploding.
The reality is, only 25 major copper mines provide 50% of primary copper, and most of these mines were discovered in the 1920s and 1930s. Due to an under- investment in copper supply the past years, there are now no new major copper mines to be commissioned until 2022/2023 at the same time that copper is set to become an above the fold page one story for global investors.
As my friend Don Coxe has said countless times in the past, “Never invest in the story on page one, invest in the story on page sixteen that is headed to page one.” Copper investors should strap on their seatbelts – 2019, 2020 and 2021 will be the revenge of copper! Only 364,000 t of copper in global warehouses – that is about 6 days worth of global demand.
China was the hidden driver of copper demand in the early 2000s (surprising most of the Major Miners), electrification is the driver “Hiding In Plain Sight” for the 2020s!
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