Copper demand to surge 50% by 2040, driven by AI, defense, says S&P

Global copper demand is projected to increase by 50% by 2040, driven by growth in the artificial intelligence and defense sectors. 

However, according to the consultancy S&P Global, annual supplies are expected to face a shortfall of over 10 million metric tons unless recycling and mining efforts are increased.

Copper's enduring popularity stems from its exceptional physical and chemical properties, making it indispensable across numerous sectors. 

Growing  copper demand and supply challenge

Copper’s status as one of the best conductors of electricity is a primary reason for its extensive use in the electronics and power transmission industries. 

Furthermore, its inherent resistance to corrosion ensures durability and reliability, particularly in infrastructure and construction applications. 

Copper's malleability and ductility allow it to be easily shaped into wires, sheets, and pipes, which is crucial for manufacturing and transportation.

These combined characteristics solidify copper's role as a vital material for modern technology and development.

According to Reuters, S&P's report indicates that while the electric vehicle sector has boosted copper demand in the last decade, the metal's requirement will surge even higher over the next 14 years. 

This increased demand will be driven by the AI, defense, and robotics industries, in addition to the consistent consumer need for appliances like air conditioners.

Global demand is projected to increase significantly, rising from 28 million metric tons in 2025 to 42 million metric tons annually by 2040, according to the report. 

The S&P report further indicated that, without new supply sources, almost a quarter of this projected demand is likely to go unmet.

"The underlying demand factor here is electrification of the world, and copper is the metal of electrification," Dan Yergin, S&P's vice chairman and one of the report's authors, was quoted in a Reuters report.

AI boosts copper demand

AI is significantly boosting demand for copper, driven by the construction of numerous new data centers. 

Last year alone, over 100 new data center projects were initiated, with an aggregate valuation approaching $61 billion.

This substantial investment highlights copper's crucial role in supporting the infrastructure for the expanding artificial intelligence sector.

The S&P report also indicated that the conflict in Ukraine, coupled with the initiatives of nations like Japan and Germany to boost their defense expenditures, is expected to stimulate demand for copper.

Copper is an essential component in almost all electronic devices. 

While Chile and Peru are the leading global copper producers through mining, China holds the position as the top copper smelter. The US is significantly reliant on imports, meeting half of its annual copper demand, and has enacted a tariff on certain categories of the metal.

In 2022, S&P released a comparable report forecasting copper demand under a scenario where the world achieves carbon neutrality—or "net zero"—by 2050.

Importantly, the current report excludes any potential supply derived from deep-sea mining.

S&P announced that the report, issued on Thursday, employs a new methodology. This approach forecasts copper demand using a base-case assumption that growth will occur independently of governmental climate policies.