Copper Bullets

Photo credit: Flickr/The U.S. Army

America's military is marching toward a greener future. It actually has nothing to do with changing the uniforms to better protect troops in battle. Instead, this latest move has it more concerned about protecting the environment. That's because starting in 2014 the U.S. Army will be issuing lead-free M-14 bullets to its troops with a full phase out of lead by the U.S. military expected by 2018.

Lead bites the bullet
Typically when the U.S. military makes a move to go green the purpose is to save green and lives. That's not the case with the move away from lead bullets. That's because the copper bullets its using to replace lead will cost the military more money. In fact, one estimate suggests the price tag is an extra $20 million per year without improving the effectiveness of the ammunition.

The issue that environmentalists have with lead is that it can easily find its way into the water supply and food chain. For example, spent bullets from hunting can land in streams or be ingested by other animals. This causes harm not only to the environment but to humans as well. In fact, studies have found that those that simply handle ammunition are found to have elevated levels of lead in their blood. That can harm organs and tissues and even result in brain damage. That's why lead's days have been numbered for a while and why the EPA new lead air quality standards are really restricting its production.

What it means for copper's future
The military is one of the top buyers of lead bullets, making its switch to copper a potential driver of copper demand in the future. The Army is estimating it will replace 8.1 million pounds of lead with copper over the next five years.

However, in the grand scheme of the copper market, it's a pretty small amount when considering that the world's second largest copper miner Freeport-McMoRan Copper & Gold (NYSE:FCX) expects to grow its annual copper production by a billion pounds by 2016. In fact, by 2015 Freeport-McMoRan is targeting annual copper production of more than 5 billion pounds, which is 37% more than it produced in 2012.

Other copper producers like Southern Copper Corp (NYSE:SCCO) and BHP Billiton Limited (NYSE:BHP) are also increasing copper production over the next few years. These can easily sop up any increased demand from the Army. In fact, copper production growth from BHP Billiton's Escondida mine alone is expected to grow from 1.1 million tonnes to 1.3 million tonnes from 2014 to 2015. Further, Southern Copper has similar growth potential as it has large copper reserves as well as organic growth projects geared to increase its output. Bottom line, global copper suppliers can easily meet any increased demand from the military. 

Investor takeaway
Copper might be the green way to go for the Army as lead bullets are bad for the environment. Not only that, but its better for soldiers to handle copper bullets as opposed to lead. That said, investors shouldn't invest in copper just because its a silver bullet for the military's latest drive to go green. The Army might be a big buyer of lead, but it simply cannot buy enough copper for its ammunition to drive up copper prices.


Fool contributor Matt DiLallo owns shares of BHP Billiton Limited (ADR). The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.