A wide range of recurring threats and factors influence substitution however, day to day, overall project cost is the key driver for copper users. Periodic concerns, such as perceived material availability, might also impact substitution choice. In 2023, copper substitution slightly increased to 1.45% of total copper use. This was as the general cost pressure in the worldwide economy intensified. If cost pressure is stronger, OEMs explore reducing costs of their components/use. Overall project cost reductions might include labour reduction, technological changes and material cost.
In the world of substitution, the threat of cost pressure is not expected to significantly ease in the near future, therefore, we anticipate copper substitution to slowly increase over 2025, but stabilise after that. This is as the energy markets and the global economy are expected to see steady growth.
Substitution is stronger in some key energy transition applications e.g. power cables, electric motors, heat pumps etc. The extent of substitution is not the same in each application as this depends on the ability of alternatives to offer similar specific performance. Furthermore, many organisations regularly experiment with using less copper to improve overall costs. Often copper is defended by its various and natural attributes, and the cost of running R&D into alternatives.
The relative cost of conductor materials – copper or aluminium – is a large % share of the overall investment of upgrading or expanding electrical grid networks. Using the lower-cost material aluminium upfront creates large savings for projects already under cost pressure. In addition, aluminium provides similar performance to copper in a range of applications, especially as the number of alloys increases. This is partly why power cables are an application that sees strong substitution and this substitution will continue in the future! If overall demand for copper does not continue to increase, continuous substitution in power cables could reduce copper demand in the sector by 15-16% (at 2023 volumes), over the next 10-20 years.
In the short term, electrification and the energy transition will likely offset major substitution however it is important to track the myriad threats. This is because alternatives, and new technologies, are continuously seeking to take market share in long held ‘safe’ applications. MM Markets is able to track substitution in various markets, including the exciting world of copper.
Thank you, and until next time!
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MM Markets provide strategy and insight through market intelligence sourced directly from market participants. We cover trending and important issues such as recycling, substitution, competitor benchmarking, see the wide range of issues we cover www.mm-markets.com.
If you would like to discuss a project with us, please do contact me colin.bennett@mm-markets.com or krisztina.kalman@mm-markets.com.
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