Copper demand is widely considered to be a proxy for economic health, and the metal is key to the energy transition ecosystem. It is essential for manufacturing electric vehicles, power grids, and wind turbines, especially as the global economy continues to electrify.
Copper demand from the electric vehicle and transportation sectors overall is expected to grow about 5% this year, according to Bank of America forecasts.
Copper is also an important material for cables used in data centers, and the growth of copper is driving demand for the red metal, especially as the artificial intelligence boom drives demand for data centers.
“Although at a slower pace, demand from EVs is still increasing, with focus shifting to the copper needed to build data centers,” the BofA note added.
Data centers use copper for a variety of electrical applications, including electrical connectors, busbars, and power cables. The International Energy Agency predicts that electricity demand from data centers will increase from 460 TWh in 2022 to more than 1,000 TWh in 2026, more than doubling to more than 1,000 TWh in 2026.
The International Copper Study Group (ICSG) has lowered its copper surplus forecast for this year as mine production was lower than expected.
Copper production growth forecast for 2024 has been lowered to 0.5% compared to the 3.7% growth estimated by ICSG last October 2023. This was primarily due to slower than expected production growth, delays in project commissioning and revised production guidance. From a major manufacturer.
Last November, First Quantum Minerals suspended production at Cobre Panama, one of the world's largest copper mines, following a Supreme Court ruling and nationwide protests over environmental concerns. Major producer Anglo American has announced that it will cut copper production in 2024 and 2025 in a bid to cut costs.
“We see copper rising to $10,500 per tonne in the near term as signs of expected physical tightening perpetuate the recovery in momentum of recent months,” Citi said in a note. The three-month copper contract is trading at $10,185.50 per tonne on the London Metal Exchange.