EVs net lion’s share in US infrastructure proposal
Electric vehicles (EVs) and batteries feature prominently in US President Joe Biden’s $2-trillion plan to rebuild the country’s infrastructure and economy.
“The American Jobs Plan is an investment in America that will create millions of good jobs, rebuild our country’s infrastructure, and position the US to out-compete China,” the White House statement reads.
The proposed American Jobs Plan allots $621 billion to reshape the transportation infrastructure of the country, and an investment of $174 billion has been earmarked for the EV market alone.
The $174-billion investment in the EV market “would enable automakers to spur domestic supply chains from raw materials to parts and support American workers to make batteries and EVs,” said David Eaton, director of government relations at Institute of Scrap Recycling Industries (ISRI).
It would also “replace 50,000 diesel transit vehicles and electrify at least 20% of our yellow school bus fleet through a new ‘Clean Buses for Kids Program’ at the US Environmental Protection Agency (EPA); and use tools of federal procurement to electrify the federal fleet, including the US postal service,” Eaton said in an ISRI newsletter.
In comparison, $115 billion will be invested to modernize roads, highways, streets, and bridges, and $80 billion will be spent on US railways.
The overall metals sector will receive a major boost if the plan comes to fruition, but with the special focus on EVs, copper and battery metals are in prime position to benefit.
Even before this proposal, demand for copper to be used in EVs and other renewable energy applications was expected to be almost the equivalent of the total US refined copper market by 2025.
Global EV and renewable demand for copper is expected to reach around 1.6 million tonnes per year by 2025, more than double the current 600,000 tpy, Richard Adkerson, chief executive officer of Freeport-McMoRan, said on January 26 during a conference call on the company’s 2020 earnings.
Copper demand rebound
Several sources in the US copper market have commented on the rebound in cathode demand in the country, which pushed up the spot premium for copper cathode last week.
Fastmarkets assessed the copper grade 1 cathode premium, ddp Midwest US at 7.5-8.0 cents per lb on Tuesday April 6, unchanged after narrowing upward from its previous range of 7-8 cents per lb a week earlier.
Fastmarkets’ monthly assessment of the copper rod premium, ddp Midwest US was 17-18 cents per lb on April 1, unchanged since early February.
Demand for copper rod has returned to pre-pandemic levels, a copper rod producer source said, adding that “it is too soon to see an impact on the market from Biden’s proposal.”
A second copper rod producer source said rod demand continued to outstrip supply.
The high exchange price of the red metal is holding back an even greater increase in demand, the first rod producer source said.
“People are concerned about the copper price increase in the first quarter [of 2021],” the source told Fastmarkets.
The most-actively traded May-delivery Comex copper contract settled at $4.1165 per lb on Tuesday, up by 3.16% from $3.9905 per lb on April 1.
The Comex copper price began 2021 at around the $3.50-per-lb mark. Since then, it has spent several weeks above $4.00 per lb.
Biden’s ambitious plan did not set the metals and the general commodities market on fire, as many are skeptical until it is actually implemented. They have adopted a “wait-and-see” approach.
“Infrastructure spending is always spoken about but never acted upon, so I am not holding my breath,” a zinc trader said. “It would be a welcome surprise if anything materializes on that front, and [it will be] definitely good [for] metal demand across the board.”
A steel producer source agreed. “The announcement is fairly new, and I am yet to see any traction yet - but if it passes, it will impact multiple markets,” the source said.
ED&F Man’s head of commodities research Edward Meir sounded a similar note in his April overview.
“The markets had a more muted reaction to the announcement, possibly because it is far from certain if this will get passed,” he said.
Removing lead pipes
One metal that is not likely to benefit from Biden’s plan is lead, because under the “Clean Water Infrastructure segment,” $110 billion will be invested to ensure clean and safe drinking water, including through the removal of lead pipes.
Isri’s Eaton noted that $45 billion will be spent to replace lead pipes and water service lines in the US through the EPA’s Drinking Water State Revolving Fund and the Water Infrastructure Improvements for the Nation Act grants.
Currently, US spot lead premiums are at multi-year highs due to supply delays and shortages.
The lead 99.97% ingot premium, ddp Midwest US was assessed at 14-16 cents per lb on April 6, unchanged since two weeks ago, and the highest since November 29, 2012.
The lead 99.99% ingot premium, delivered Midwest US was assessed at 16-18 cents per lb on the same day, also flat since March 23.