Rising Copper Demand Faces Challenges Amid Market Disruptions
Copper Demand Expected to Rise Significantly by 2035
Insufficient investment in mining operations may lead to sustained shortages and price fluctuations in the copper market. A recent report predicts that global copper demand is projected to increase by 24% by 2035, climbing to 42.7 million tonnes per annum (Mtpa), while adding 8.2 Mtpa to current figures. This growth is driven not only by traditional economic factors but also by emerging demands resulting from electrification and digital innovation.
The Role of Disruptors in Amplifying Demand and Prices
Despite the promising demand trajectory, there are four prominent disruptors that could influence both quantity and price volatility beyond expectations. These disruptors could potentially add another 3 Mtpa, making up 40% of the total demand increase by 2035.
Data Centres as a Key Variable
Data centres have emerged as a significant wildcard in the demand forecasting for copper. With the expected rise of artificial intelligence, an additional consumption of approximately 2,200 terawatt hours (TWh) of electricity is anticipated by 2035, which, according to industry analysis, will propel copper demand for electrical grid infrastructures to about 1.1 Mtpa by 2030.
Interestingly, since copper makes up less than 0.5% of overall project costs, developers of data centres tend to overlook its price volatility. A rapid expansion in this sector could trigger substantial price spikes, intensifying market volatility by depleting inventories quickly.
“Data centres create inelastic demand,” remarked Peter Schmitz from Wood Mackenzie. “When the need for copper arises in this fast-evolving sector, it tends to be utilized without much concern for cost fluctuations, resulting in increased unpredictability in this decade.”
The Energy Transition's Impact on Copper Demand
In addition to AI-related demands, the ongoing energy transition is reshaping consumption patterns of copper significantly. The shift towards renewable energy sources is projected to necessitate an additional copper supply of approximately 2 Mtpa over the upcoming decade. The geopolitical dynamics surrounding copper supply chains have become more evident as nations work to detach from unstable energy imports. It’s estimated that copper demand within this sector will escalate from 1.7 Mtpa currently to 4.3 Mtpa by 2035, yielding an annual growth rate of about 10%.
“The required copper for electric vehicles can be up to four times more than that of conventional vehicles,” explained Schmitz. “As battery technologies develop, the demand for copper within charging infrastructure and power systems will remain high, with expectations for EV-related copper demand to double by 2035, reinforcing copper’s essential role in the energy transition.”
Accelerating Copper Growth in Asia
India and Southeast Asia are positioned as burgeoning hubs for copper consumption, expected to contribute an additional 3.3 Mtpa of demand by 2035. This growth translates to average annual growth rates of around 7.8% in India and 8.2% in Southeast Asia, as per recent analyses.
If these regions emulate even a fraction of China’s prior growth trajectory, their construction and power sectors alone may necessitate an extra 5.4 Mtpa of copper. Given that per-capita copper consumption in these areas remains considerably below the global average, there exists substantial potential for increased demand over the long term.
Geopolitical Factors Influencing Demand
An additional layer to the demand dynamics arises from shifting geopolitical priorities. The increase in Europe’s defence budget—now targeted at 3.5% of gross domestic product—amid rising global security tensions, adds a modest direct demand for copper of approximately 25 to 40 ktonnes per annum over the next ten years. Yet, the broader consequences are expected to manifest in reinforced infrastructure resilience and modernization.
“The rise in defence budgets has resulted in a subtle but significant increase in copper demand,” noted Schmitz. “While military hardware budgets may seem restrained, the associated infrastructures such as robust power grids and communications systems are copper-heavy, further extending copper's requirements amid this evolving developmental landscape.” Defence industries across the globe are gearing up for expansions in fighter programs, missile tracking systems, and ammunition production, which simultaneously necessitates supportive infrastructure, all of which adds pressure to copper supply.
Challenges in Meeting Rising Demand
To match this anticipated demand growth, an additional 8 Mtpa of mine capacity along with 3.5 Mtpa of scrap metal will be vital by 2035. Wood Mackenzie projects that the industry may need to adjust its baseline expectations for annual mine disruptions—from 5% to 6%—effectively translating to the loss of approximately 250 to 300 ktonnes from the market annually, which would further tighten supply.
In an environment constrained by supply, the interrelation of these disruptors could lead to prolonged periods of heightened prices and market unpredictability.
“Copper has become a pivotal element in the global energy transition,” stated Charles Cooper. “From various cities worldwide, the ramifications of supply chain disruptions are becoming increasingly apparent, and if stakeholders in government and industry do not take timely actions, we risk turning a crucial metal for electrification into a scarce resource.”
Frequently Asked Questions
What is the anticipated growth percentage for copper demand by 2035?
The anticipated growth for copper demand is set to reach 24% by 2035, increasing to 42.7 Mtpa.
What industries are driving the increased demand for copper?
Increased demand is primarily driven by sectors such as electrification, digitalization, renewable energy, and electric vehicles.
How do data centres impact copper price volatility?
Data centres create inelastic demand, leading to significant price fluctuations due to increased usage regardless of copper prices.
What role does geopolitical tension play in copper demand?
Geopolitical factors contribute to rising defence budgets and infrastructure investments, which indirectly increase copper demand.
Why is copper considered crucial for the energy transition?
Copper is essential for electric vehicles and renewable energy systems, driving significant increases in demand as these technologies evolve.
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