Wind Drives Metal Demand

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Commodities

We just love it when a developing technology opens up a new demand for metals. Wind power cannot be said to be new, but advances in technology are rapidly making wind power a viable alternative to conventional power generation.

The critical point will come, according to an Economist report this week, when a carbon tax is levied on coal fired power stations. Even the industry widely believes this will happen, as witnessed by the dozens of new coal fired power plants stuck in the project stage pending a ruling on how much and when.

Approximately 34% of the cost of a wind turbine is in the generator. At that rate T Boone Pickens one gigawatt wind farm to be built as a joint venture with GE in Texas will incur some $680m of copper and related metal components in the generators, the control electronics and gearbox components. Not to mention the steel for the towers and upgrading of the electricity grid that will be required to connect up the windy sites to the cities where the power is consumed. In fact GE is already earning $6bn in revenues from wind power and is convinced half of America’s new generating capacity will be wind powered by 2012.

In addition to demand for steel either as structural sections or as sheet to roll and weld into columns for the Towers the demand is likely to be for Copper and magnetic materials, principally cobalt, nickel and iron. In a report produced for the US Dept of Energy estimates of 50,000 mt of Copper and 60,000 mt of Magnetic materials per annum were projected for the latter part of this decade. It could be argued that new power production will anyway create a demand for metals so why is this new demand. The answer is that technological changes combined with government legislation may well make the phasing out of older coal fired power stations and the replacement by wind (and other power sources) happen much sooner than had previously been thought.

–Stuart Burns

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