Glimmer of hope for copper from Europe green energy target

LONDON Wed Aug 29, 2012 9:45am EDT

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LONDON (Reuters) - Expected growth in Europe's generation of renewable energy offers hope for copper demand, helping to offset a lack of appetite from builders and other traditional industrial users as economies slow.

Green energy projects such as wind farms, which use large amounts of copper, are set to grow as countries aim to meet a European Union target to obtain 20 percent of power from renewable sources by 2020.

Consultancy Wood Mackenzie estimated that European wind farms' demand for copper will climb by 15 percent between 2013 and 2015.

"That (renewable energy) part of copper consumption is going to grow ... and will be a long-term growth area as well," said Gayle Berry, analyst at Barclays Capital.

"Is it going to offset the weakness in export demand for a country like Germany or construction demand for a country like Spain? I highly doubt it. But it is certainly part of a longer-term picture of being an area of growth for European demand."

European copper demand is expected to contract this year, the International Copper Study Group said in April, the latest statistics available. In 2011, global demand growth slowed to 2.5 percent from 2.7 percent in 2010.

BOOMING BUSINESS

Last year, European wind farms needed only 37,000 metric tons (40,786 tons) of copper out of regional demand of 4 million metric tons, according to Wood Mackenzie, but this is set to grow.

In Germany, Europe's biggest economy and power user, renewable electricity generation hit a new record in the first half of 2012 at 67.9 billion kilowatt hours, an increase of 19.5 percent from the same period last year.

The German government also has given priority status to the building of 1,834 km of transmission lines to carry electricity from sources such as offshore wind parks. Copper is used extensively in power cables and wiring.

Britain, the Nordic region and Spain are also fast expanding their wind power capacity.

"Northern Europe is not very sunny, so wind power is quite well placed to meet this," said Ian Littlewood, a research analyst at Wood Mackenzie.

In wind turbines, copper wires are used to carry electricity to substations and connect the system to the grid. For offshore farms that require undersea cabling, the amount of copper needed is even greater.

Onshore wind turbines each require 16 metric tons of copper and offshore turbines 31 metric tons, according to Barclays Capital.

GREEN CARS

Another growth area will be hybrid vehicles. Each hybrid car contains roughly 34 kg of copper versus 19 kg in the average fuel-burning car, according to Ernst & Young.

In the EU, the annual growth rate of hybrid vehicles will rise by more than six times to above 500,000 cars in 2017, research firm Frost & Sullivan has predicted.

"As we move to better technologies in terms of emissions control and environmentally responsible motoring, there will be a concomitant increase in demand for copper," said David Russell, director of global resources at Ernst & Young.

"And as we pull ourselves gradually out of a recession the demand for these vehicles will grow and ... the implication for future demand from the automobile sector is very positive."

(editing by Jane Baird)

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