The global copper market is on a trajectory towards a significant supply deficit by 2035, a concern highlighted by the International Energy Agency (IEA). This impending shortfall, potentially reaching 30%, is primarily driven by surging demand from burgeoning sectors such as electrical grid infrastructure and artificial intelligence (AI) data centers, while the rate of new copper production struggles to keep pace. Despite short-term price fluctuations influenced by economic uncertainties and geopolitical shifts, the fundamental long-term outlook for copper points to a persistent imbalance between available resources and increasing consumption.
Copper's journey in the market this year has been marked by notable volatility. Prices for the essential metal initially climbed to $5.24 per pound on March 26, only to recede to $4.05 following global trade tensions. However, it quickly rebounded, establishing a new peak of $5.69 per pound by July 8. This spike was triggered by the announcement of a proposed 50% tariff on copper imports into the United States. The subsequent clarification that these tariffs would apply exclusively to semi-finished copper products, rather than raw ore or refined copper, led to a rapid adjustment in prices.
The sustained demand for copper stems from its exceptional conductivity, durability, and cost-effectiveness, rendering it indispensable across numerous applications. It forms the backbone of modern electrical grids and is a vital component in green energy technologies, including electric vehicles, solar panels, and wind turbines. Furthermore, the expansion of data centers and 5G networks, both substantial energy consumers, further fuels copper demand. Notably, AI servers, with their considerably higher power requirements compared to conventional data centers, are poised to become a significant driver of copper consumption. The IEA projects that AI facilities could represent between 1% and 2% of global copper demand by 2030, with potential for even greater consumption depending on the rapid pace of AI adoption.
In 2024, global consumption of refined copper approached 27 million tonnes (Mt), marking a 3.2% increase from the previous year. China emerged as the dominant consumer, accounting for nearly 60% of worldwide refined copper use, significantly overshadowing the United States, which ranked second at 6%. China's robust demand is largely attributed to its substantial investments in energy grid upgrades and its ambitious decarbonization efforts. While other markets may experience a slowdown in copper demand due to economic uncertainties and geopolitical instabilities, China's appetite for the metal is expected to remain strong for at least another decade, supported by ongoing industrialization and infrastructure development.
Beyond China, other Asian economies are also poised to contribute significantly to future copper demand. India, currently accounting for 3% of global demand, is projected to surpass the U.S. in consumption and reach an estimated 10% by 2050. Similarly, Vietnam's share of consumption is anticipated to jump from 1% in 2024 to 6% by 2050. This growth in both nations is propelled by their continuous industrialization, infrastructure projects, and rapid urbanization. Moreover, lower production costs in these markets could enable them to capture a larger share of the semi-finished copper products manufacturing sector.
Despite the increasing demand, the supply side faces mounting challenges. Global mined copper output reached 22.8 Mt in 2024, with Chile, the Democratic Republic of Congo, and Peru leading production. However, the IEA forecasts that global mined copper supply will peak around 24 Mt later this decade and subsequently decline. This decline is a result of diminishing ore grades, the depletion of existing reserves, and the retirement of older mines. The average copper ore grade has decreased by 40% since 1991, and the rate of new deposit discoveries has stagnated. Compounding this issue is the lengthy lead time, averaging 17 years, from the discovery of new deposits to the commencement of metal production.
China's pivotal role extends beyond consumption to encompass the global copper supply chain. In 2024, China processed a remarkable 45% of the world's copper, a capacity significantly expanded by an 83% increase in its refining capabilities since 2020. This dwarfs the refining capacities of other major players like the Democratic Republic of Congo and Chile. While Japan and Korea possess developed copper refining industries, their combined share remains around 8% of global capacity. China is projected to further solidify its dominance, potentially accounting for an estimated 50% of refined copper production by 2040, benefiting from unparalleled economies of scale and operational expertise.
The recent announcement by former U.S. President Donald Trump in early July to impose a 50% tariff on copper imports initially caused a surge in copper prices. However, the subsequent clarification that these tariffs would only apply to 51 types of semi-finished products, excluding copper ore and refined copper, caused a sharp decline in U.S. prices, aligning them once again with international market rates. The U.S. imported 810,000 tons of refined copper in 2024, representing approximately half of its total consumption, with Chile as its primary supplier. This policy adjustment means that some copper stockpiles accumulated in the U.S. in anticipation of the tariffs may now be re-exported to other markets. Conversely, copper exporters are expected to redirect their supplies to major consumers such as China and the European Union, where copper stocks have been affected by the U.S.'s pre-tariff buying spree.
Looking forward, the copper market faces a complex interplay of forces. The long-term trajectory points to a substantial imbalance between supply and demand, driven by technological advancements and global electrification. However, the short-term outlook remains susceptible to economic downturns and geopolitical uncertainties, which could lead to continued price volatility. The high concentration of copper mining and refining operations in a few key regions also leaves the market vulnerable to potential supply chain disruptions, underscoring the critical need for diversified sourcing and sustainable production practices.