Rising Demand for Copper Drives Up Prices: How Industrialization and Urbanization Will Continue to Fuel Growth

According to Graeme Train, head of metals analysis at Trafigura, the electric vehicle sector is expected to account for one-third of the estimated 10 million tons of new demand in the metals industry. The rest of the demand will come from areas such as electricity generation, transmission, distribution, automation, manufacturing capex, and cooling systems within data centers. The growth in data centers is linked to artificial intelligence (AI).

The production of electric vehicles, solar panels, and grid investments in China has led to an increase in demand for copper used in the power and construction sectors. This trend is expected to continue due to limited supplies of refined copper metal and concentrate. The price of copper on the London Metal Exchange (LME) has reached near two-year highs at around $10,000 a ton due to factors such as dwindling stocks in LME registered warehouses and disruptions in the supply chain. Analysts have adjusted their forecasts for the copper market balance, with some anticipating significant shortages of around 26 million tonnes this year.

Train believes that copper demand will continue to grow due to industrialization and urbanization in emerging markets such as India where per capita consumption is only half a kilogram. In contrast, China and developed countries have per capita copper consumption levels of 10 kgs and seven kgs respectively. Despite these challenges, Train remains optimistic about the outlook for the copper market as demand continues to rise in various sectors worldwide.