Sunday, May 26

Surge in Copper Demand due to EVs, AI, and Clean Energy

The surge in demand for copper, driven by technological advancements such as artificial intelligence, automation, and the shift towards renewable energy and electric vehicles, has been highlighted. Copper cables, which conduct electricity, are particularly in demand.

Graeme Train, the head of metals analysis at Trafigura, a Swiss-based company, estimates that a third of the 10 million tonnes of new demand will be generated by the electric vehicle sector. He also noted that another third will be used for electricity generation, transmission, and distribution. The remaining demand will come from areas such as automation, manufacturing capital expenditure, and cooling systems in data centers.

The rapid production of electric vehicles and solar panels, along with grid investment in China and increased manufacturing activity, has already increased the demand for copper used in power and construction industries. This, coupled with a shortage of refined copper metal and concentrate, has pushed copper prices on the London Metal Exchange (LME) to near two-year highs of around US$10,000 per ton.

Industry sources attribute part of this price surge to the declining stocks in LME registered warehouses, which have fallen more than 35% since October of the previous year. Disruptions, such as the closure of First Quantum’s Cobre mine in Panama, have also contributed to the tight supply of mined copper or concentrate, further driving up copper prices.

Analysts have been adjusting their forecasts for the copper market balance since Anglo American reduced its production guidance in December. Some now anticipate significant shortages in the copper market, estimated to be around 26 million tonnes this year.

Train anticipates that copper demand will be further boosted by industrialization and urbanization in emerging countries, especially India, where the per capita consumption is only half a kilogram per year. In contrast, per capita copper consumption in China and the developed world is 10kg and 7kg respectively.