From AI to Renewables: The Growing Demand Driving Copper’s Volatility
Copper, a metal with an annual turnover exceeding $200 billion (£154bn), has experienced significant volatility in recent years. From its low of $1.65 per pound in 2015 to a recent high of over $5, copper has seen wild price swings driven by various factors, including supply deficits and growing demand in emerging technologies.
In 2021, a supply deficit of 441,000 tonnes—less than 2% of global demand—pushed copper prices up by 25%. While some analysts express concerns over the impact of China’s unfinished property developments and the strain on net-zero goals, others point to technological advancements as key drivers of future copper demand.
Artificial intelligence (AI) and the gig economy are increasingly influencing copper consumption. For instance, one gigawatt of power for a new data center requires over 25,000 tonnes of copper cabling. With 16 GW of AI data center capacity expected to be added in the US by 2026, an additional 400,000 tonnes of copper will be needed, valued at $3.2 billion at current prices.
The transition to renewable energy is also boosting copper demand. Solar, hydropower, and wind energy installations require significant amounts of copper, particularly for cabling. While overhead high-tension cables are typically made from aluminum, submerged or buried cables rely on copper.
On the supply side, the global production of refined copper has stagnated since 2016, and new mines are urgently needed to replace depleting reserves. The average grade of copper reserves has fallen from over 1% in the 1980s to below 0.4% today, increasing production costs as more rock must be processed for the same amount of metal.
Despite the growing demand, new copper discoveries are scarce, and many mining companies have been hesitant to invest in new projects. Instead, they have focused on share buybacks and acquisitions. Permitting and funding challenges further complicate the development of new mines.
History has shown that copper prices can surge rapidly during shortages, as the metal has no easy substitutes. With the growing demand from technology sectors and renewable energy, the pressure on copper supplies is expected to intensify, potentially leading to further price volatility.
