The boom in electric vehicles, artificial intelligence (AI), energy infrastructure and automation will drive at least 10 million tonnes of additional copper demand by 2035, Swiss multinational commodities trading company Trafigur has predictedto. According to Graeme Train, head of metals analysis at Trafigura, a third of the 10 million tonnes of new demand will come from the electric vehicle sector, “A third is electricity generation, transmission and distribution, and the rest is for things like automation, manufacturing capex and cooling systems within data centers,” Train said.
A couple of weeks ago, Saad Rahim, chief economist at Trafigura, estimated that artificial intelligence alone had the potential to add a million tonnes per year to copper demand by 2030. “If you look at the demand coming from data centers and related to the demand from artificial intelligence, that growth has suddenly exploded,” Rahim said. That million tonnes still adds to the 4-5 million tonnes deficit we have by 2030. That’s not something anyone has actually taken into account in many of these supply-demand balances,” the analyst added.
Naturally all this is reflected in the prices: Copper futures rallied near a five-year high at $4.46 per pound ($9,812/t), and Wall Street is turning increasingly bullish. Citi predicted that the metal has entered its second secular bull market, “driven by strong demand growth linked to decarbonization,” adding that “only higher prices will resolve these deficits.”
Citi noted that the last mega copper bull market occurred in the 2000s, when prices increased 5-fold in three years driven by rapid urbanization and industrialization in China. Citi advised corporate consumers to hedge their copper exposures because there is the potential for a new “explosive price rally” over the next three years.
Citi also said copper prices could reach $10,500/t in the next three months, bringing the second and third quarter price average to $10,000/t from the $9.5k/t previously estimated. Copper hit Citi’s target of $9,741/t on Thursday. Citi’s new short-term bull scenario sees copper prices skyrocketing to $12,000/t over that time frame.
Meanwhile, strategists at Bank of America say the copper supply crunch is already here, with a “lack of mining projects becoming a growing problem for copper. This, coupled with investment in green technologies and the recovery of the global economy, is expected to boost prices. to $10,250/ton by the fourth quarter”.
