Copper: The Strategic Commodity of the Decade?

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Copper mine, power grids, renewable energy and data centres illustrating copper's strategic role in global electrification. — Copper at the heart of global electrification: power grids, renewable energy, data centres and rising demand meet the constraints of global mining supply.

Copper has been part of human civilisation for thousands of years.

It is found in our homes, cars, factories and electrical appliances, as well as in the kilometres of cables carrying electricity around us.

At first glance, it is difficult to imagine a more traditional commodity.

And yet copper could find itself at the heart of some of the most important economic transformations of the next decade.

The energy transition. Power grid expansion. Electric vehicles. Industrial automation. Data centres. Artificial intelligence.

These trends have one thing in common: they require us to generate, transport or use more electricity.

And behind an increasingly electrified economy lies a much more physical reality: cables, transformers, motors, substations and industrial equipment.

In other words, copper.

But there is an important distinction to make.

The fact that the world may need more copper does not necessarily mean that its price must rise.

As we explained in our guide on how to analyze a commodity, spectacular demand growth is not, by itself, an investment thesis.

We need to answer a different question:

Can supply increase quickly enough to meet this additional demand?

When it comes to copper, this is where the story becomes particularly interesting.

Why Has Copper Become So Strategic?

Copper has a combination of properties that is remarkably difficult to replicate.

It conducts electricity and heat extremely well. It resists corrosion. It is relatively easy to work with. And it can be recycled without losing its key properties.

Silver conducts electricity even better, but its cost obviously prevents its widespread use in electrical infrastructure.

Copper’s main competitor is therefore aluminium.

Aluminium has significant advantages. It is much lighter and can be considerably cheaper. This is one reason why it is already widely used in some overhead power lines.

But aluminium is less conductive than copper for the same cross-sectional area and cannot easily replace it in every application.

Where space, electrical performance, durability or heat dissipation matter, copper often retains an advantage.

This question of substitution is fundamental.

As with any commodity, a sufficiently large increase in price eventually changes behaviour.

If copper became extremely expensive, manufacturers would have a stronger incentive to reduce the quantities they use, recycle more material or switch to aluminium wherever technically feasible.

We should therefore avoid assuming that every new electric vehicle or data centre creates an immutable amount of additional copper demand.

Usage changes with prices.

The Energy Transition Is Primarily an Electricity Transition

When we talk about the energy transition, attention often focuses on power generation.

More solar panels.

More wind turbines.

More batteries.

More electric vehicles.

But generating electricity is not enough.

It also needs to be transported to wherever it will be consumed.

This may be one of the most important — and least spectacular — parts of the copper thesis.

The Real Challenge Could Be the Power Grid

Electricity networks in many countries were built for a different world.

Relatively centralised power generation supplied consumers through large transmission and distribution networks.

That system is becoming much more complex.

Wind and solar generation is geographically dispersed. Energy storage capacity is expanding. Electric vehicles create new sources of demand. Heat pumps electrify heating. Data centres, some requiring hundreds of megawatts of power, need to be connected rapidly.

At the same time, part of the existing grid infrastructure is ageing and simply needs to be replaced.

The International Energy Agency estimates that more than 2,500 GW of power generation, storage and large electricity-consuming projects are currently waiting in grid connection queues around the world.

Annual investment in power grids may need to increase by roughly 50% by 2030 from the approximately $400 billion currently invested each year.

Perhaps even more importantly, building new grid infrastructure can take five to fifteen years — considerably longer than building certain types of power generation or a data centre.

That mismatch matters.

The economy can decide relatively quickly that it wants to consume more electricity.

The physical infrastructure required to deliver that electricity changes much more slowly.

And that infrastructure consumes large quantities of metals.

Copper is therefore not simply a bet on electric vehicles.

It is potentially a bet on the electrification of the economy itself.

Artificial Intelligence: Spectacular, but Only Part of the Story

We previously explored the relationship between copper and artificial intelligence.

The connection may initially seem counterintuitive.

Artificial intelligence is one of the most intangible technologies imaginable.

Yet its development depends on a huge amount of physical infrastructure.

An AI model runs inside a data centre.

That data centre needs servers, but it also requires electricity supply, transformers, distribution equipment, cooling systems and a connection to the grid.

And these requirements are growing quickly.

In its central scenario, the IEA estimates that global data centre electricity consumption could rise from around 415 TWh in 2024 to approximately 945 TWh by 2030.

That would mean more than doubling in just six years.

Accelerated servers, which are closely associated with the development of AI, would account for almost half of that increase.

That sounds extraordinary.

But it is worth keeping the numbers in perspective: data centres would still represent slightly less than 3% of global electricity consumption in 2030.

This is precisely why the copper thesis should probably not be built around artificial intelligence alone.

AI is an accelerator. It is not the only engine of demand.

Industry, air conditioning, transportation, power grids and broader electrification collectively represent a much larger trend.

And that arguably makes the thesis stronger.

It does not depend on the success of a single technology.

What About China?

It is impossible to understand copper without discussing China.

For several decades, Chinese urbanisation and industrialisation have been among the main drivers of global commodity demand.

Buildings.

Roads.

Factories.

Machinery.

Power networks.

Industrial infrastructure.

The slowdown in China’s property sector is therefore unquestionably a risk for copper demand.

But reducing the analysis to:

“Chinese property is slowing, therefore China will consume less copper”

would be far too simplistic.

The structure of Chinese investment is changing.

China continues to invest heavily in power grids, renewable energy, electric vehicles, batteries and its industrial base.

The relevant indicator is therefore not simply Chinese GDP growth.

We need to understand where capital is being invested.

An economy can experience a property slowdown while simultaneously expanding its electrical infrastructure at a remarkable pace.

China also plays another, less widely understood role in the copper market.

It does not simply consume copper.

It processes it.

Mine, Concentrate, Smelting, Refining: Understanding the Copper Supply Chain

To understand what is really happening in the copper market, we need to avoid a common misconception.

There is not simply one homogeneous product called “copper”.

Before copper reaches a cable, motor or electrical system, it passes through several stages.

Mine → ore → concentrate → smelting → refining → copper used by industry

A bottleneck can emerge at any one of these stages.

That distinction is extremely important.

The world can have plenty of refining capacity while simultaneously facing insufficient supplies of concentrate from mines.

And this is precisely what the market has started to show.

What Treatment Charges Can Tell Us

Treatment and refining charges, generally known as TC/RCs, are, in simplified terms, the fees smelters receive for processing concentrate supplied by mining companies.

When concentrate is abundant relative to smelting capacity, smelters generally have greater bargaining power.

When concentrate becomes scarce, the opposite happens.

Conditions for smelters have deteriorated dramatically.

Spot treatment charges have even remained negative for extended periods, effectively meaning that some smelters have had to accept paying for access to concentrate.

This does not mean that the world is currently running out of refined copper.

It tells us something more subtle:

processing capacity has expanded faster than the available supply of mined concentrate.

And that takes us directly back to the central issue in the copper thesis: upstream supply.

China Controls a Critical Part of Copper Processing

China’s expansion in this part of the supply chain has been remarkable.

According to the IEA, China represented approximately 15% of global copper smelting capacity in 2005.

By 2025?

Approximately 50%.

More than 90% of the increase in global copper smelting capacity since 2005 is estimated to have taken place in China.

This is why the copper question increasingly extends beyond price.

It is also becoming an issue of supply security and industrial policy.

Owning a mine is not necessarily enough.

The material still needs to be processed.

This resembles the challenge seen in several other strategic supply chains: the countries containing natural resources are not necessarily the same countries that dominate their processing.

The geographical concentration of refining capacity therefore deserves as much attention as the geographical concentration of mines.

The Real Problem: Increasing Copper Supply Takes Time

We now arrive at the heart of the thesis.

Demand can change quickly.

Mining supply generally cannot.

A technology company can order new servers.

A government can decide to strengthen its electricity grid.

An automobile manufacturer can increase production.

But a copper mine cannot be built in two years.

A deposit must first be discovered.

Its resources need to be assessed.

Technical studies need to be completed.

Permits must be obtained.

Financing must be secured.

Infrastructure needs to be built.

The mine then needs to be developed before production can gradually ramp up.

For major projects, this process can easily take more than a decade.

Consider Resolution Copper in Arizona, for example. The project has been under development for years, and Rio Tinto is now considering production around the middle of the 2030s.

This inertia is exactly what we highlighted in our framework on how to analyze a commodity.

Rapidly growing demand is interesting.

But rapidly growing demand facing supply that cannot respond quickly is much more interesting.

Existing Mines Must Also Fight to Maintain Production

There is another challenge.

Developing new production capacity is not enough.

The industry must also offset declining output from ageing mines.

The richest ores are often extracted first.

As a deposit matures, miners may need to extract and process more rock to produce the same quantity of copper.

That requires more energy, water and capital.

And geological constraints are only part of the problem.

A new mine may contain enormous resources while still being extremely difficult to develop because of:

permitting;
financing;
environmental constraints;
water availability;
infrastructure;
local opposition;
taxation;
political stability.

The world does not necessarily lack copper in the ground.

It could face a shortage of something economically much more relevant:

copper that can be produced at the right price, in the right place and at the right time.

Could the World Really Face a Copper Deficit?

This is where the projections become particularly interesting.

In its Global Critical Minerals Outlook 2026, the IEA estimates that global copper demand could increase by approximately 7 million tonnes by 2040.

More importantly, despite the new projects announced in recent years, expected mine supply would still cover only around 75% of estimated primary copper requirements in 2035 under its scenario based on currently announced policies.

That implies a potential shortfall of approximately 25%.

Interestingly, this estimate has become slightly less pessimistic: the IEA had previously projected a shortfall of around 30%.

That nuance matters.

New projects are appearing.

Markets react.

Supply is not static.

But the potential gap remains large enough to deserve serious attention.

In the shorter term, the International Copper Study Group expects global mine production to grow by only around 1.6% in 2026, followed by 2.3% in 2027.

We are therefore far from an immediate explosion in supply.

And that is precisely why copper deserves to be watched closely.

Can Recycling Solve the Problem?

Copper has one enormous advantage compared with some other commodities.

It is highly recyclable.

Copper from a cable reaching the end of its useful life can be recovered and used again.

In theory, as the amount of copper accumulated throughout the economy increases, the world gradually builds an enormous “urban mine”.

Buildings.

Machines.

Power grids.

Vehicles.

Electrical equipment.

All of that copper can eventually return to the market.

The IEA indeed considers recycling an essential part of the response to any future copper deficit.

It expects the volume of available copper scrap to increase significantly after 2030.

In some long-term scenarios, recycled material could theoretically satisfy a substantial share of global requirements.

But there is a problem.

Copper Used Today Does Not Return Tomorrow

A cable installed in a building can remain there for decades.

The same is true of power grid infrastructure.

There is therefore a delay between copper consumption and the point at which that material becomes available for recycling.

Rapid infrastructure development can absorb enormous amounts of copper today without immediately generating an equivalent source of secondary supply.

Recycling is therefore likely to be an important part of the long-term solution.

But it does not automatically eliminate potential shortages during the infrastructure build-out phase.

Could Aluminium Break the Copper Thesis?

This is one of the main risks.

No manufacturer will accept endlessly rising input costs without attempting to adapt.

Aluminium is the obvious substitute for copper in many electrical applications.

It is already widely used in electricity networks.

As the price gap between the two metals increases, aluminium becomes increasingly attractive.

This creates a natural limit to extremely bullish copper forecasts.

At $8,000 per tonne, redesigning a piece of equipment may not be worthwhile.

At a much higher copper price, engineers and purchasing departments have a much stronger incentive to reconsider their choices.

This mechanism is fundamental to understanding commodities.

High prices contain the seeds of their own decline.

They encourage:

substitution;
recycling;
efficiency;
new mining projects;
reduced consumption in some applications.

A shortage is therefore never a static situation.

It is an economic signal to which the rest of the system eventually responds.

A 2035 Deficit Does Not Mean a Shortage Today

This may be the most important point for investors.

Suppose the IEA is correct and currently planned projects are insufficient to satisfy copper demand in 2035.

That absolutely does not mean copper prices must rise every year until 2035.

Copper could easily fall 30% during a global recession.

Why?

Because financial markets do not value long-term fundamentals in isolation.

They also react to:

global growth;
Chinese demand;
inventories;
the US dollar;
interest rates;
investor positioning;
new supply announcements;
and, above all, expectations already reflected in prices.

We encountered exactly the same mechanism in Why Can a Stock Fall After Good Earnings? Understanding Market Expectations.

A company can report excellent results and still see its share price fall if investors expected something even better.

Copper follows the same principle.

Strong future demand is not enough.

We also need to ask:

Is reality becoming better or worse than the market already expects?

This distinction fundamentally changes the way we should approach commodities.

The US Dollar Matters Too

Copper is traded internationally in US dollars.

Movements in the American currency can therefore influence its price and global financial conditions.

We explored in more detail in Why Does the US Dollar Remain So Strong? how interest rates, demand for liquidity and perceptions of risk can strengthen the dollar.

All else being equal, a very strong dollar can create headwinds for commodities priced in that currency.

Conversely, a weaker-dollar environment can provide support.

This is obviously not the structural driver of the copper market.

But it helps explain why an excellent long-term story can produce completely different price movements in the short term.

Could Copper Be at the Heart of a New Commodity Supercycle?

We previously asked Are We Entering a New Commodity Supercycle? and examined whether years of underinvestment could be setting the stage for another major cycle.

Copper may be one of the best commodities with which to test that hypothesis.

Major commodity cycles often emerge when three conditions come together:

1. Strong structural demand

2. A prolonged period of insufficient investment

3. Supply that cannot respond quickly

The commodity supercycle of the 2000s was driven in large part by China’s rapid industrialisation.

Today’s situation is different.

This time, the story may not simply be about urbanising one enormous emerging economy.

It may be about gradually electrifying a large part of the global economy.

Power grids.

Renewable generation.

Energy storage.

Vehicles.

Data centres.

Air conditioning.

Industrial automation.

And unlike some speculative investment narratives, these are physical assets that actually need to be built.

This does not prove that a new commodity supercycle has begun.

But copper displays several of the characteristics we would expect to find in a commodity capable of benefiting from one.

8 Indicators to Watch to See Whether the Copper Thesis Is Playing Out

Rather than trying to predict exactly what copper will be worth in 2030, a more robust approach is to identify the indicators that could progressively confirm or invalidate the thesis.

1. Copper Inventories

Inventories held on the LME, COMEX and Chinese exchanges provide an indication of immediate physical availability.

A sustained decline in inventories across several regions simultaneously would be a more meaningful sign of tightening conditions than a purely speculative price move.

2. TC/RCs

Treatment and refining charges provide insight into the balance between mine production and smelting capacity.

Persistently extremely low levels would suggest that concentrate remains difficult to secure.

3. Production at Major Mines

Production volumes in Chile, Peru, the Democratic Republic of Congo and other major producing regions should be monitored closely.

Disruptions or production revisions can quickly change the market balance.

4. New Projects That Are Actually Financed

Announcing a discovery does not create a new mine.

The more relevant question is:

How many projects actually reach a final investment decision and enter construction?

5. Power Grid Investment

This may be one of the most useful indicators of structural demand.

If investment in electricity networks continues to accelerate, an important part of the long-term copper thesis remains intact.

6. China

Not simply Chinese GDP.

Property, manufacturing, electricity infrastructure, electric vehicles and industrial investment need to be considered separately.

7. Recycling

A major acceleration in recycled copper supply could reduce the need for primary copper more quickly than expected.

8. Aluminium Substitution

If manufacturers rapidly reduce the copper intensity of products and infrastructure, long-term demand projections will need to be revised.

These indicators serve an important purpose.

They prevent an investment thesis from becoming a belief.

What Could Break the Copper Thesis?

A good analysis must be falsifiable.

If no future information could make us change our minds, we probably no longer have an analysis.

We have a conviction.

Several developments could make the copper thesis significantly less attractive.

A Severe Global Recession

Copper remains deeply cyclical.

A collapse in industrial production and construction would immediately weigh on consumption.

A Much More Severe Chinese Slowdown

China remains so important to the copper market that its demand can dominate short- and medium-term trends.

A Massive Wave of New Mining Projects

High prices attract capital.

Previously marginal projects become profitable.

Eventually, supply responds.

Faster Substitution With Aluminium

Excessively high copper prices would naturally accelerate the search for alternatives.

Much More Efficient Recycling

Improved collection and processing could significantly increase secondary supply.

Falling Copper Intensity

Engineers may learn to manufacture the same equipment with less copper.

A Slower Energy Transition

Demand forecasts are based on assumptions.

Different policies, budget constraints or technological developments could change them.

And finally:

Paying Too Much for an Excellent Story

This is probably the most universal risk of all.

An extraordinary asset can become a poor investment when purchased at a price that already assumes everything will go perfectly.

Commodities are no exception.

So, Is Copper Really the Strategic Commodity of the Decade?

It is still too early to say with certainty.

But few commodities currently sit at the intersection of so many structural transformations.

The world is gradually electrifying transportation, buildings and industry.

Renewable generation capacity is expanding.

Power grids need to be modernised and extended.

Data centres are adding new, highly concentrated sources of electricity demand.

At the same time, increasing copper production takes time.

Mines take years to develop.

Ore grades at some deposits are declining.

Projects require enormous amounts of capital.

Regulatory, environmental and political constraints are significant.

And a considerable share of global processing capacity is now concentrated in China.

That combination is what makes copper interesting.

Not simply:

“The world will need more copper.”

But rather:

“The world may need substantially more copper at the same time as rapidly increasing its production is becoming particularly difficult.”

Those are two very different statements.

Copper will remain cyclical.

Its price will probably fall sharply again at some point even if the long-term structural trend remains favourable.

China will experience slowdowns.

Aluminium will replace copper in some applications.

Recycling will expand.

New mines will eventually be developed.

That is how markets work.

But copper currently offers an almost textbook example of the framework presented in our guide on how to analyze a commodity:

understand demand, study supply elasticity, identify bottlenecks, analyse substitution and recycling, and define what could invalidate the thesis.

Copper is therefore not simply a bet on artificial intelligence.

Nor is it simply a bet on electric vehicles.

It is not even just a bet on the energy transition.

It may represent something much more fundamental:

the raw material behind the physical infrastructure of an increasingly electrified global economy.

And that may be precisely why copper deserves a special place among the commodities to watch over the coming decade.