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On August 16, yesterday, copper for September delivery climbed 2.84%. The proximate cause was a new projection from the International Monetary Fund raising China’s growth rate for 2017 to 6.7% in 2017. That’s up from an earlier forecast of 6% growth. For the period 2018-2020 the IMF said that annual growth in China would average 6.4%. That’s a huge upward revision from the earlier estimate of 6% annual growth. Since global copper demand is tied so closely to growth in China’s economy, it makes sense that copper prices would climb if investors and traders think that growth is about to pick up in China.

But the projections from the International Monetary Fund hit a copper market that was already on a major uptrend. (Which, of course, magnified the effect of of the IMF growth upgrade.) Copper is up 18.8% from its low on May 9, 2017 at $249.80 pound. It closed at $296.65 a pound on August 16.

The gains in copper, though, predate and go beyond what I’d expect from projections on China’s economy alone. (Especially since some recent projections disagree with the IMF’s optimistic view and see China’s growth slowing in the second half of 2017.)

And the reason for those gains in the price of copper?

The increasing adoption of electric cars.

You see electric cars–and their charging infrastructure–use more copper than do current internal combustion vehicles.

Estimates for how much more copper depend on assumptions about the size of the batteries in the cars and the power of charging stations. The estimates of copper demand per electric vehicle range from 183 pounds from technology-watcher IDTechEx to 304 pounds per vehicle plus 44 pounds per charging station from Glencore, one of the world’s biggest copper producers.

The other important variable for investors and traders is the rate at which consumers buy electric vehicles. The faster the growth rate of those sales, the more likely it is that the copper market is going to find itself short of supply. That would send copper prices skyrocketing.

Some commodity analysts see the market for electric cars growing so quickly that the global mined copper supply will need to double over the next 20 years from the current 20 million metric tons. That’s an aggressive view. The consensus seems to be that somewhere between 1.7 million metric tons and 5 million metric tons of extra supply will be needed to meet demand by 2025. That’s not going to be easy considering that many of the world’s largest copper mines are mature and are coping with falling ore grades and that new discoveries seem to show up in politically unstable countries with dismaying regularity.

Getting that level of extra production is going to require a big increase in copper prices. Paul Gait of Bernstein Research told the Financial Times that he sees prices and supply working the way: “It took $10,000 a metric ton copper and super-normal margins to lift production from 15 million to 20 million metric tons during the commodities super cycle [between 2003 and 2013]. At the very least, that is going to be required again,” he said. Yesterday copper traded at $6382 metric ton on the London Metals Exchange.

The next question? What stocks? And that’s another post.