BHP Warns of Looming Copper Crunch as AI Drives Demand Surge by 2050

BHP, the global mining giant, projects a significant rise in copper demand by 2050, escalating from 30.4 million tons in 2021 to 52.5 million tons, marking a 72% increase. Despite data centers currently accounting for less than 1% of copper demand, this figure is expected to rise to 6%-7% by mid-century.

The advent of AI is reshaping global energy systems, driving demand for critical commodities like copper. BHP warns that this trend will exacerbate the looming "copper shortage." Vandita Pant, BHP's CFO, indicated that the rise of data centers and AI necessitates higher-energy computations, potentially bumping annual copper demand by an additional 3.4 million tons by 2050.

Commodity analyst Colin Hamilton highlights that while data centers might see reduced direct copper demand, the infrastructure powering them requires substantial copper. This material is integral not only for powering but also for cooling systems and connecting processors within these centers.

However, some analysts caution about the uncertainty in long-term demand forecasts for copper, particularly for AI's future impact. They're attempting to predict a market whose dynamics are still unfolding, especially considering the unpredictable trajectory of AI utilization by 2050.

Copper remains vital across various sectors aiming for net-zero emissions, including electric vehicles, power cables, and solar plants. The anticipated shortage has sparked fierce competition for mining assets. Earlier, BHP’s attempt to acquire Anglo American resources faltered, failing at the negotiation stage.

Despite current oversupply and subdued prices—trading around $9,207 per ton after a 15% drop from May peaks—BHP anticipates this trend continuing until the late 2020s. The company previously forecasted that as this decade concludes, increasing demand could surpass supply, potentially driving copper prices sharply upward.