Copper in a Clean Energy Future - Copper Alliance

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Legal Statement

The purpose of the information in this presentation is to guide ICA programs and provide members with information to make independent business decisions.

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Antitrust Guidelines Antitrust Guidelines for Copper Industry Trade Association Meetings The following guidelines with respect to compliance with antitrust laws of the United States, Japan and European Community 1 are intended to govern the conduct of participants in copper industry trade association meetings, both at the meeting itself and in informal discussions before or after the formal meeting. Price: Competitors should not discuss future prices (including terms of sale) of their products. There is no blanket prohibition against the mention of or reference to current or past prices but limits must be observed. Such references or mentions should occur only when necessary in connection with the development of association programs. For example, reference to a particular price level in comparing the cost of a copper product to a competing product is permitted. Whenever possible, such references should be discussed in advance with legal counsel. Competitive Information: Competitors should not discuss the market share of a particular copper producer or copper fabricator’s products. Furthermore, nothing should be said at a meeting which could be interpreted as suggesting prearranged market shares for such products or producer production levels. The overall market share of copper products may be discussed with regard to competition with non-copper products and general market acceptance. New Products: Competitors should not encourage or discourage the introduction of a new product by another competitor or reveal a particular copper company’s plans to change the production rate of an existing product or to introduce a new product. No company should disclose to another company whether it is in a position to make or market a new product. New products may be discussed in a technical manner or from the standpoints of competition with non-copper products and general market acceptance. In addition, proposed methods for and results of field and laboratory testing can be considered. The Role of Legal Counsel: Legal counsel attends association meetings to advise association staff and other meeting attendees regarding the antitrust laws and to see that none of the matters discussed or materials distributed raise even the appearance of antitrust improprieties. During the course of a meeting, if counsel believes that the discussion is turning to a sensitive or inappropriate subject, counsel will express that belief and request that the attendees return the discussion to a less sensitive area. A paper entitled ‘Copper Industry Trade Associations and Antritrust Laws’ is available upon request. 10/92, 5/93, 10/10 1.

Other foreign competition laws apply to International Copper Association, Ltd. (ICA)’s activities worldwide.

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Copper opportunities in low carbon megatrends November 2017

Trusted commercial intelligence

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This report analyses copper demand from three sectors linked to decarbonisation trends The report has been compiled by Wood Mackenzie and MetalsPlus Renewable Energy 1. Solar 2. Wind

Electromobility 1. Electric vehicles 2. Charging Infrastructure

Energy Efficiency 1. Electric motors 2. Distribution Transformers 3. Air conditioners

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Wind power notably involves high levels of copper intensity of use with the transformer and cabling Ground mounted utility solar uses more copper roof mounted types, but has also experienced more substitution from aluminium Typical wind and solar copper intensities by installation type 15.30

 Offshore wind involves higher copper intensity per MW owing to the greater amount of cabling required

Copper intensity (t Cu / MW)

 Rooftop solar typically use copper wiring for all DC wiring

» However, limited interconnection

means they use less copper relative to utility ground mount solar

 Utility solar historically used up to 6 t Cu per MW but substitution from aluminium has reduced the intensity over time

5.35

Onshore Wind Offshore Wind

Source: Wood Mackenzie

0.51

0.54

Residential Solar

Commercial Solar

Rooftop

1.43

1.38

Utility String Inverter Solar

Utility Central Inverter Solar

Ground Mount

 On average, wind is much higher than traditional coal fired power at 1 – 2 t Cu per MW

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Global solar and wind power will each account for over 1 TW of capacity by 2035 Asia, particularly China, drives rapid near and mid term growth due to falling technology costs, policy incentives and development of transmission infrastructure Solar power generation capacity by region 1,200

Wind power generation capacity by region 90%

1,200

16%

80% 1,000

14%

1,000

800

60% 50%

600 40% 400

30% 20%

200

Wind generation capacity (GW)

Solar generation capacity (GW)

70%

12% 800

10%

600

8% 6%

400

4% 200

2%

10% 0 2015 2020 Asia (excl. China) Europe ROW YOY Global % change Source: Wood Mackenzie

2025

2030 2035 China North America YOY China % change

0%

0 2015 2020 Asia (excl. China) Europe ROW YOY Global % change

2025

2030 2035 China North America YOY China % change

0%

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Rapid growth of wind power installations consume on average 359 ktpa of copper up to 2020 and 339 ktpa to 2025 The contributions from solar installations is more modest, owing to the lower copper intensity, averaging ~50 ktpa through the Base Case forecast period Forecast global copper demand from installed solar power 70

450

2.5 60 3.2 59.2

400

2.3 2.7 39.2

40

2.6 2.8 43.8

2.8 2.6

350

49.3

300

30

20

Gradual slowing of installed capacity and copper demand due to maturing renewables growth in our Base Case scenario 163

66 Copper Demand (kt)

50 Coppe Demand (kt)

Forecast global copper demand from installed wind power

250

125

276

200

198

150

163

100 10

0

142

197

50

2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Utility

Source: MAKE, Wood Mackenzie

Commercial

Residential

0

2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 Onshore

Offshore

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Copper use in batteries increases copper intensity for electric vehicles over internal combustion engine vehicles The use of copper in electric motors is another notable contribution to increased intensity of use Copper intensity per vehicle (kg) by type

Passenger

Light Commercial Vehicles

Component ICE Battery1

HEV

PHEV

BEV

1

15

38

ICE

HEV

PHEV

BEV

5

32

60

Heavy Commercial Vehicles ICE

BEV Bus 173

Rest of Vehicle

22

39

40

42

26

47

48

50

42

80

Total

22

40

55

80

26

52

80

110

42

253

 Battery contributes significantly to higher copper intensity moving from ICE through to EV  Higher copper usage within the rest of the vehicle are largely attributable to the electric motor windings and the wiring harness/electrical distribution system (to accommodate higher voltages)  Aside from additional electrical components, the need for improved heat exchanger equipment to deal with higher running temperatures also serves to boost copper consumption in xEV  There are some losses in engine hardware in BEV versus ICE/HEV/PHEV as no combusting engine is incorporated, however these are small overall and comfortably outweighed by gains elsewhere 1The

copper content of an average sized battery for the particular propulsion type has been used Source: Wood Mackenzie, IDTechEx

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Wood Mackenzie expects EVs to account for 34% of global passenger vehicle sales by 2035 with over 50% being hybrid types The split of EV type is heavily dependent on region – a BEV is not currently viable in regions with limited charging infrastructure WM global passenger EV forecast (base case), 2015 - 2035 35

40%

30

35%

12

40% 35%

10

25% 20 20% 15 15% 10

30% Million vehicles sales

30%

25 Million vehicles sales

WM China passenger EV forecast (base case), 2015 - 2035

8

25%

6

20% 15%

4

10%

5

5%

0 2015

2020 HEV

Source: Wood Mackenzie

2025 PHEV

BEV

2030

2035

% sales EV (RHS)

0%

10% 2

5%

0 2015

2020 HEV

2025 PHEV

BEV

2030

2035

% sales EV (RHS)

0%

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Copper demand from passenger car EVs overtakes ICE vehicles after 2033, accounting for over 1.9 million tonnes by 2035 The offset from fewer ICE sales through the forecast is minimised due to the much lower copper intensity Global passenger car copper demand by vehicle type, 2015 - 2035 4000

2029

Chinese passenger car copper demand by vehicle type, 2015 - 2035 1200

2033

3500

1000

3000 800

kt Cu

kt Cu

2500 2000 1500

600

400

1000 200

500 0 2015

2020 ICE

Source: Wood Mackenzie

2025 HEV

PHEV

2030 BEV

2035

0 2015

2020 ICE

2025 HEV

PHEV

2030 BEV

2035

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The three energy efficiency sectors are major sources of generated electricity loss Reducing electricity loss in major consuming sectors is therefore a major area of importance for carbon emission reductions Breakdown of Electricity Generation, Consumption and Losses

 From generation to use about 17% of electricity is lost, much of it from network transformers

Losses 17%

Electricity Production 100%

Electricity Consumption 83%

 In use, motors and motor driven systems account for 45% of all electricity use, and a similar share of loss

Other Uses

 Air conditioners are a major application for electric motors Energy Losses Electric Motors 45%

Source: MetalsPlus, IEA 2011

Energy Used

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Energy efficiency is enforced through minimum energy performance standards (MEPS) which are present in most major markets MEPS are the key to product upgrades and most developed regions have them in place, although developing markets are where the future gains will be made MEP Presence by Country and Sector Motors

Refrigerators Source: MetalsPlus

Air Conditioners

Mandatory

Voluntary

No Policy or no data

Transformers

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Copper intensity per unit of capacity increases for all sectors, as efficiency gains require higher material intensity Copper in energy efficiency sectors is mainly present as winding wire and additional tubing for air conditioners, and more copper will be required per unit to achieve higher efficiency Sectors

Copper forms

Copper Intensity 0.90

kg Cu / kVA

Distribution Transformers

CAGR 2017-35

0.85 0.80

0.3%

0.75

0.70

2005

2010

2015

2020

2025

2030

2035

1.1

Kg Cu / kW

Electric motors

1.0

0.4%

0.9 0.8 0.7 0.6

2005

2010

2015

2020

2025

2030

2035

2.5

Air Conditioners kg Cu/ kW

2.3

1.9 1.7 1.5

Source: MetalsPlus

Copper Tube

Winding Wire

Other Forms

0.2%

2.1

2005

2010

2015

2020

2025

2030

2035

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Copper demand in energy efficiency sectors almost doubles from 4.7 Mt in 2017 to reach 9.7 Mt by 2035 Increases in stock added and replacement, particularly in India and Other Asia, drives growth at CAGR of 4.0%, 3.9% and 4.3% for transformers, motors and AC respectively Copper demand by energy efficiency sector 10,000

100%

9,000

90%

8,000 7,000

70%

6,000

60%

5,000

50% 3,859

1,823

3,000 2,000

1,842

865 2005

2010

2015

Distribution Transformers Source: MetalsPlus

Other Asia & Oceania

China

40% India

30%

20%

1,843

1,000 0

North America

2020

2025

Electric Motors

2030

2035

Air Conditioners

Other Europe & Africa

10% 0%

European Union

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035

4,000

Latin America

80%

4,029

kt Cu

kt Cu

Global distribution of copper demand for energy efficiency sectors

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The energy efficiency sector will contribute most to copper demand for the megatrends analysed but electromobility grows faster Energy efficiency contributes 80% of demand but the rapid growth in electric vehicle production sees electromobility increases at 14.2% CAGR vs 4.1% for energy efficiency Forecast copper demand by sector CAGR 2016-35

14,000

12,000 10,207 Copper Demand (kt)

10,000

6,394 6,000

4,000

5,161

344

-0.9%

2,767

14%

9,730

4.1%

404 1,043

415 542

223 406

7,983

6,611 4,531

4.9%

390 1,834

8,059 8,000

12,840

5,436

2,000

0

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Energy Efficiency

Source: Wood Mackenzie, MetalsPlus

Electromobility

Renewables

Total

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Disclaimer Strictly Private & Confidential

 This report has been prepared for International Copper Association by Wood Mackenzie Limited. The report is intended solely for the benefit of International Copper Association and its contents and conclusions are confidential and may not be disclosed to any other persons or companies without Wood Mackenzie’s prior written permission.  The information upon which this report is based has either been supplied to us by International Copper Association or comes from our own experience, knowledge and databases. The opinions expressed in this report are those of Wood Mackenzie. They have been arrived at following careful consideration and enquiry but we do not guarantee their fairness, completeness or accuracy. The opinions, as of this date, are subject to change. We do not accept any liability for your reliance upon them.

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Wood Mackenzie™, a Verisk Analytics business, is a trusted source of commercial intelligence for the world's natural resources sector. We empower clients to make better strategic decisions, providing objective analysis and advice on assets, companies and markets. For more information visit: www.woodmac.com WOOD MACKENZIE is a trade mark of Wood Mackenzie Limited and is the subject of trade mark registrations and/or applications in the European Community, the USA and other countries around the world.

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