The global demand for copper is going to increase tremendously. As there is already a supply gap due to lower production and shrinking reservoirs, which is expected to drive copper prices up many folds. Jefferies, one of the world’s leading investment banking and capital markets firm has predicted that demand for copper will increase from 239 thousand metric tons to 450 thousand metric tons on an annual basis till 2030, and that alone is due to the expansion in the data center sector.
Commodity trader Trafigura also predicted that copper’s global demand may surge by 1 million metric tons till 2030. Trafigura also described data centers and artificial intelligence surge as primary factors. Not to forget the EV markets and renewable energy firms are also part of creating the demand.
Copper ETF options
As global brands like Apple, Google, and OpenAI are expanding their AI portfolios, their suppliers are striving to provide the parts. This situation is driving copper prices up and also metal stocks. It is expected that copper prices will reach $10,500 per metric ton by the end of the current year, which amounts to a 12.4% increase. exchange traded funds (ETFs) are also an option for investors interested in the metal sector.
Some of the ETF options are Sprott Copper Miners and iShares Copper and Metals Mining. Take a look at the charts below.
AI and data centers are contributing to the copper demand
Artificial intelligence applications ranging from chatbots to facial recognition softwares and what not, have created a strong demand for critical components used in gadgets and computer components, especially GPUs. AI processing relies on huge data centers, and these data centers are expanding their capacities and building new ones to meet the exploding demand. All these components require quite a bit of copper for construction.
According to Reuters, their survey suggests that copper demand is expected to be 26 million metric tons globally for 2024 and also that a 100 thousand metric tons deficit in copper supply is also expected by the next year.
Jefferies update about copper also highlights the fact that the supply response is usually slow in meeting the demand due to the sector’s own situations, according to them, it will take quite some time, even years, to balance the market. They suggested that the lead time for bringing new copper supply to market is 5 years for brownfields and more than 10 years for greenfield projects.
Other critical metals needed for manufacturing are also rising, with price increments contributing to many other factors along with the usual inflation. China controls most of the supply of essential metals and is in a much stronger position as compared to western countries.
China is also the largest producer of copper, and its extensive manufacturing infrastructure demands a large supply of copper, which makes it the largest consumer as well, if observed globally. Geopolitical situations may also put a strain on global copper production and supply routes. Trafigura’s chief economist, Saad Rahim, points out that each copper project is now 30% smaller if compared to what the size was 10 years ago. He also said that new projects are needed to meet the supply gap and the increasing demand, as the lead time for new projects is already quite longer.