Copper Demand and Price Projections Amid Global Economic Shifts

China's economic slowdown and declining sales of electric cars are driving short-term adjustments in copper demand and price expectations. After reaching $5.20 per pound on the Comex in May, copper prices fell back to the $4.20-$4.30 range, similar to the levels seen at the start of the year.

As China consumes 55% of the world’s copper, its economic trajectory significantly impacts global markets. With expectations that China's economy will continue to slow down, coupled with a weaker adoption rate of electric vehicles (EVs), analysts at Fitch Ratings are predicting a potential fall of up to 10% in copper prices by 2026. However, industry experts agree that any downturn is likely to be temporary.

Long-term growth is expected to be fueled by structural transformations such as climate change mitigation, advances in artificial intelligence, and emerging urban centers in developing markets. Copper's inherent properties, such as high conductivity and durability, make it critical for technologies needed in clean energy solutions, including renewable generation, energy storage, and electrification of transportation and industries.

Carlyle Group Chief Strategy Officer Jeff Currie, a recognized market investor, referred to copper as "the new oil," underlining its vital role in the energy transition. Similarly, Newmont CEO Peter Toth stated in a presentation that copper will be the key commodity in the next super cycle, driven by electrification, energy transition, and technological growth.

Current estimates suggest global copper consumption could rise significantly from 26 million tons in 2023 to over 50 million tons annually by 2050. Analysts from BHP and Fastmarkets predict a compound annual growth rate of 2.6% in demand over the next decade. This represents an approximate increase of 1 million tonnes per year until 2035—double the annual growth volume observed over the past 15 years.

Not all industries will contribute equally to this rise in demand. The energy transition is expected to be the primary driver, while traditional sectors like construction will grow at a slower annual rate of 1.4%. According to Fastmarkets, copper consumption for energy transition-related sectors, including EVs, is projected to increase at an annual rate of 11.2%.

Electric vehicles represent a major growth area for copper, which is used in batteries, motors, and charging infrastructure. An internal combustion vehicle typically requires around 20 kilograms of copper, whereas an EV requires between 60 and 80 kilograms. The recent drop in copper prices, particularly since July, has been linked to falling EV sales in Europe and new tariffs on Chinese vehicles announced by the US and EU. However, CRU Group's head of copper and zinc, Erick Heimlich, attributes the recent price decline more to macroeconomic policies and reduced subsidies for EVs rather than a lack of underlying demand.

Heimlich emphasized that EV demand and associated electrical infrastructure will more than compensate for weaker demand from China’s construction sector. As on-shoring policies shift EV production to other regions, copper consumption will also become more geographically distributed.

In addition to the energy transition, artificial intelligence has increased demand for high-capacity data centers, which require significant copper inputs for cooling systems. BHP analysts project that copper demand linked to the digital economy could increase from 1% of total consumption today to 6% by 2050.

Industry experts agree that the energy transition, urban growth in emerging markets, and increased digitalization will drive future copper demand, but note that supply growth has lagged. Fastmarkets estimates that primary copper concentrate supply will grow at 1.8% per year, while refined copper supply will expand at 2.1%, falling short of the expected demand growth of 2.6%. As a result, a structural deficit of over 2 million tons per year is anticipated through 2034.

While increased recycling and efficiency improvements are seen as potential solutions to mitigate the shortfall, industry experts warn that significant new investments are needed. New copper projects face challenges such as longer permitting times, lower ore grades, and rising costs. Recycling efforts are projected to increase refined copper production by nearly 5% annually by 2034, but this alone may not meet the growing demand.

The expected structural deficit has led to bullish long-term price forecasts, with some analysts predicting copper prices could reach $11,538 per tonne by 2034, and as high as $15,000 per tonne by the end of the decade. Industry executives have pointed to the disconnect between government ambitions for rapid energy transitions and the slow pace of permitting for new mining projects as a key bottleneck.