The global copper market is facing an increasingly severe structural supply-demand imbalance. The green energy transition, AI infrastructure expansion, and emerging market infrastructure construction are jointly driving demand higher, but long mine development cycles, declining ore grades, and insufficient investment are making it difficult for supply to keep pace. A copper shortage could not only push prices higher over the long term but also raise the cost of the energy transition and constrain the development of related industries.
According to a report released this week by BloombergNEF, the global copper market will enter a "large-scale long-term shortage" starting in 2028, with the supply gap expected to reach 8% of demand by 2035 and further widen to 44% by 2050. The International Energy Agency has previously issued similar warnings.
Copper prices have already reflected expectations of tightening supply and demand in advance. London Metal Exchange copper prices hit a record high of $14,875 per tonne last month, up 76% cumulatively since the start of 2024. Potential copper tariff policies under the Trump administration have prompted U.S. buyers to stockpile copper in advance, while the Strait of Hormuz crisis has tightened the supply of sulfur needed for copper smelting, further driving prices higher. If the structural shortage continues to intensify, copper prices could face greater long-term upward pressure.
Multiple Demand Growth Drivers Make Copper a Key Bottleneck for the Energy Transition and AI Expansion
Copper has excellent electrical conductivity and is an important raw material for a low-carbon energy system, widely used in solar power generation, electric vehicles, and related power infrastructure. At the same time, the rapid expansion of AI data centers is also increasing copper demand, from internal equipment such as servers to the power supply facilities needed to maintain operations, all of which depend on copper.
In addition, geopolitical turmoil is pushing countries to increase procurement of high-tech military equipment, and high-growth developing countries are continuing to advance infrastructure construction, providing additional support for copper demand. BloombergNEF regards these trends as several major "megatrends" in the global economy and warns that insufficient copper supply could become a common bottleneck constraining their development.
The supply side, however, is finding it difficult to respond quickly to growing demand. Teck CEO Jonathan Price predicted last week at the Financial Times Metals and Mining Summit in the UK that the copper supply gap could reach about 30% by 2035.
Mine Development Cycles Last as Long as 15 Years, and the Energy Transition May Face a Greater Shock
The core challenge for copper supply is that new capacity is difficult to bring online quickly. Price noted that building a data center may take only six months, but discovering, permitting, and building a new mine could take 15 years. At the same time, many old mines that have operated for decades are facing continuously declining ore grades, making it difficult for mining companies to maintain existing output, while new mine projects are relatively limited.
According to analysis by Wood Mackenzie analysts, changes in institutional investors' risk appetite over the past two decades have also intensified supply constraints. Investors are more inclined to require mining companies to improve the operating efficiency of existing mines or expand scale through mergers and acquisitions, rather than investing capital in developing higher-risk, longer-cycle new mines. Some large undeveloped copper mines are located in countries with higher political risk, further weakening Western mining companies' willingness to invest.
For mining companies, tight supply means a more favorable long-term pricing environment. Price also said the copper market is ushering in "very favorable long-term market prospects." But for downstream industries, a sustained shortage means higher raw material costs and some demand going unmet.
AI data center operators with strong financial resources may be able to withstand higher procurement costs, while for developing countries with relatively limited funds, rising copper prices could significantly increase the cost of grid construction, renewable energy projects, and electrification upgrades, and may even slow the green transition. The impact of a copper crunch therefore extends beyond the metals market itself and could further transmit to global energy transition and infrastructure investment.
Comments