Copper: The Unseen Engine of the Next Industrial Revolution
A looming shortfall of this critical metal threatens to derail the world’s ambitions for green energy, artificial intelligence, and national security.
For much of the past year, financial markets have been preoccupied with safe-haven assets, central bank policy, and inflation. Yet, quietly beneath the surface, a fundamental shift has been underway in the pricing of a far more critical commodity: copper. Already up around 3% year-to-date, following a substantial 40% gain in 2025, copper is signaling a structural change in demand that could reshape the global economy. Analysts warn that demand could outpace supply within the next decade, potentially triggering a crisis for industries reliant on this foundational material.
From Edison to Electrification: Copper’s Enduring Legacy
Copper’s role in modern civilization dates back to the late 19th century, when Thomas Edison utilized it to transmit electricity across cities. Since then, it has become indispensable, embedded in energy systems, industry, transportation, and communications. Today, its importance is intensifying as the world embarks on a new era of electrification.
Copper is at the core of several transformative technologies – electrification, artificial intelligence (AI) infrastructure, electric vehicles (EVs), and defense technologies. However, the sheer scale and speed of this transformation are pushing the limits of copper production. S&P Global estimates a potential shortfall of around 10 million metric tons by 2040 without significant investment in new supply.
Record Prices Reflect a Fundamental Shift
At the beginning of the year, copper prices reached all-time highs on the London Metal Exchange (LME), hitting $13,407 a metric ton. Historically, copper has been a cyclical commodity, closely tied to global growth, particularly in construction and manufacturing. However, this time feels different. Demand drivers are proving to be broader and more durable, less susceptible to short-term economic fluctuations.
“An increasing share of copper consumption is now linked to long-term electrification trends,” noted one analyst. This shift is driven by copper’s unique properties: its exceptional conductivity, corrosion resistance, natural antimicrobial characteristics, and recyclability. While aluminum is often proposed as a substitute, it only offers about 60% of copper’s conductivity, requiring thicker cables and additional insulation.
The Four Vectors Driving Demand
According to S&P Global, global copper demand is projected to increase by approximately 50% by 2040, rising from roughly 28 million metric tons today to 42 million. This growth is fueled by four key factors: core economic demand, the energy transition, the rise of AI and data centers, and defense modernization. Asia is expected to account for 60% of this incremental demand.
Three-quarters of global copper consumption is tied to electrical applications, including power generation, transmission, distribution, electronics, and electrical equipment. Construction remains the largest single end-market, providing a stable base of demand.
The energy transition is a significant catalyst, with the electrification of transport and power systems driving increased copper use. Notably, an electric vehicle requires 2.9 times more copper than a combustion engine vehicle, due to the demands of wiring, batteries, power electronics, and electric motors.
More recently, AI and data centers have emerged as a rapidly growing source of demand. S&P Global estimates that copper demand from data centers could surge from around 1.1 million metric tons in 2025 to roughly 2.5 million metric tons by 2040, driven by internal power distribution, cooling systems, and grid connections. AI training data centers alone are projected to account for over half of this demand by the end of the decade.
Emerging technologies like humanoid robotics are also poised to increase demand. A single humanoid robot typically contains 4 to 8 kilograms of copper, used in motors, actuators, wiring, sensors, batteries, and semiconductors. Even conservative adoption scenarios suggest a material impact.
Finally, geopolitical tensions and military modernization are driving increased defense spending and, consequently, copper demand. Copper’s reliability in electrical systems, communications, and propulsion makes it crucial for military equipment and infrastructure. At the 2025 NATO summit in The Hague, member states committed to raising defense spending to 5% of GDP, potentially driving annual copper demand from defense applications to approach 1 million metric tons by 2040 – roughly three times current levels.
A Constrained Supply Side and the Challenge of New Mines
While demand is surging, supply is projected to remain constrained due to the aging of existing mining assets. Without significant capacity growth, a deficit of around 10 million metric tons is anticipated by 2040. Closing this gap presents a massive challenge.
Substitutes are not a viable solution, given copper’s unique properties. Over time, the depletion of copper mines has made extraction increasingly complex and costly, compounded by growing regulatory pressures and environmental opposition from local communities. Recent disruptions, such as force majeure declared at Freeport-McMoRan’s Grasberg Mine (representing around 4% of global output) and strikes at Capstone Copper’s Mantoverde Mine in Chile, illustrate these vulnerabilities.
Developing new copper assets is a lengthy process, taking nearly two decades – approximately 17 years – from discovery to first production, due to regulatory, environmental, political, and cost-related hurdles. Current prices, a senior official stated, are insufficient to incentivize the development of major new deposits by 2040. Most easily accessible deposits have already been mined or are currently in production.
The Role of Recycling and China’s Dominance
Maximizing production from existing assets, improving operational efficiency, and streamlining permitting processes are crucial. Future supply will depend on deeper exploration, but this will be more costly and technically complex. While several new deposits have been discovered, their feasibility hinges on future price levels and technological advancements.
Secondary supply, through recycling, offers a partial solution. Unlike other metals, copper retains its essential properties when recycled, making it virtually identical to newly mined material. Total end-of-life copper waste is expected to grow by about 4% per year, reaching over 15 million metric tons by 2040. If recycling rates rise from 50% in 2025 to 66% in 2040, recycled copper could contribute roughly 6 million metric tons to the total supply. However, developing efficient collection and processing infrastructure is essential, and policies will play a crucial role in expanding recycling worldwide.
The smelting and refining of copper are heavily concentrated in China, controlling a substantial share of global capacity – roughly 12 of the 29 million metric tons worldwide – and continuing to expand its footprint. This concentration, estimated at 40 to 50% of the global total, heightens systemic vulnerability and the risk of geopolitical disruptions, as processing margins become increasingly fragile due to declining treatment and refining fees.
A Global Race for Critical Metals
Governments are recognizing the strategic importance of mineral supply chains, fostering international cooperation and encouraging the involvement of sovereign wealth funds to strengthen and diversify access to critical mineral resources, reducing reliance on China. The world is entering an era of unprecedented growth in renewable power, electric vehicles, artificial intelligence, data centers, and defense, driving a steep rise in global copper demand. This rapid electrification is outpacing the growth of copper supply, creating a global race for critical metals – a competition not only about geological scarcity but also about the control of the entire value chain, from mining to refining.
