Chile hopes EVs will revive copper industry

To many people in the vast mountains in the north of Chile, China is their hope for invigorating the copper mining industry and their livelihood.

Here rests the world's largest copper mine. Not far from the world's driest desert is Chuquicamata, where copper has been produced continuously for centuries - until last month. In June, Chuquicamata shut down for 12 days. Miners went on strike to demand better pay in the face of falling copper prices.

Prices of copper, the lifeblood of Chile's economy, have plummeted and helped sink economic growth in the Latin American country. Through 2018, prices of the metal used in wiring and motors fell more than 20 percent.

Chile is now looking to China and its giant electric vehicle industry to lift the metal price and, with it, the country's economy.

"The use of copper in an electric vehicle is quite high in comparison to a regular car. We are talking about a ratio of at least four to one compared to a gasoline vehicle," said Alvaro Flano, president of the Trade Association of Electric Vehicles of Chile.

If Chinese electric vehicle, or EV, production continues to rise the way it did in 2018, demand for copper should also grow, and that would be good news for Chile's struggling copper producers and exporters.

"EV copper demand and related infrastructure accounts for about two-thirds of our expected growth forecasts between 2018 and 2030," said Oliver Nugent, a metals strategist at Citigroup.

Copper accounts for more than half of Chile's exports. About one-third of Chile's copper production is now sold to China. This could grow, as China's production of electric vehicles grows.

By 2025, EV sales in China could hit 5 million units per year, by some estimates. At more than eight times current levels, such production would prove a boon for Chile's exports of copper and lithium, though requiring a larger, long-term commitment from investors.

"This growing demand base for copper is significant in that it goes beyond the pace and reach of scrap and existing mine supply, establishing the need for the long-term investment in new copper mining projects," Nugent said.

Increases in production and sales of EVs continue in China even as sales of traditional cars and trucks have been falling every month for about a year.

For the first five months of this year, the production and sales of new energy vehicles reached 480,000 units and 464,000 units, increasing 46 percent and 41.5 percent year-on-year, according to the China manufacturers association.

As the figures surge, demand for Chilean copper and lithium, another important component of EV batteries, is certain to rise.

"If you talk about 50 or 100 million vehicles that are manufactured on the planet, the amount is astronomical," said Flano. "I believe the need for copper will have a permanent and growing demand."

And the Chinese government is committed to shoring up its EV sector. Subsidies for manufacturers that were introduced in 2009 have come to an end, but the government is focused on building a strong nationwide network to charge vehicles throughout the country's cities and highways, according to China's Ministry of Finance. Such a network is key to speeding up demand for EVs.

Chile is also looking to China's EV market to boost demand for lithium. The Latin American country is the world's second-largest lithium producer, after Australia. In 2018, the amount of the mineral extracted by Chile was double that of China, which ranked third in lithium production, followed by Argentina and Zimbabwe.

The author is a freelance journalist for China Daily.

Diego Laje contributed to this story.