The demand for copper in the metals industry is expected to increase by 10 million tons in the near future, with estimates suggesting that one third of this demand will come from the electric vehicle sector. The rest of the demand will be attributed to areas such as electricity generation, transmission, distribution, automation, manufacturing capex, and cooling systems within data centers.
The growth in data centers is linked to artificial intelligence (AI), which has led to an increase in demand for copper used in power and construction sectors. The production of electric vehicles, solar panels, and grid investments in China, along with increased manufacturing activity in the top consumer, has also contributed to this rise in demand.
As a result of this increased demand and limited supplies of refined copper metal and concentrate, prices on the London Metal Exchange (LME) have surged to near two-year highs at around $10,000 a ton. Sources in the copper industry attribute this surge to dwindling stocks in LME registered warehouses, which have decreased by over 35% since October last year. Disruptions in the supply chain, such as the closure of First Quantum’s Cobre mine in Panama, have also contributed to the upward price movement this year.
Analysts have adjusted their forecasts for the copper market balance due to these factors and anticipate significant shortages of around 26 million tonnes this year. Graeme Train believes that copper demand will continue to grow due to industrialization and urbanization in emerging markets like India where per capita consumption is only half a kilogram. In contrast, China and developed countries have per capita consumption levels of 10 kgs and seven kgs respectively.
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