AI to Boost Copper Demand 50% by 2040, but More Mines Needed to Ensure Supply, S&P Says

Global copper demand is expected to increase by 50% by 2040 due to growing use in artificial intelligence, defense, and robotics, according to a report by S&P Global. This surge in demand is being driven by the increasing electrification of industries and the expansion of new technologies. The consultancy estimates that demand will reach 42 million metric tons by 2040, up from 28 million metric tons in 2025.

The report warns that without additional mining and recycling initiatives, global copper supply could fall short by more than 10 million metric tons annually. This shortage would represent nearly a quarter of expected demand by 2040. "The underlying demand factor here is electrification of the world, and copper is the metal of electrification," Dan Yergin, S&P Global's vice chairman and one of the report's authors, told Reuters.

AI is a major growth area for copper, with more than 100 new data center projects last year valued at nearly $61 billion. The defense sector is also contributing significantly, as countries like Japan and Germany increase spending following the conflict in Ukraine. "Demand for copper really is inelastic in the defense sector," said Carlos Pascual, an S&P vice president.

Why Is Copper Demand Rising Sharply?

Copper is one of the best electricity-conducting metals and is widely used in construction, transportation, tech, and electronics. The rise in demand is linked to the expansion of AI infrastructure and the increasing number of data centers globally according to Seeking Alpha. These centers are expected to account for a large share of copper consumption as the world continues to digitize. The report also highlights the importance of copper in energy transition technologies such as electric vehicles and renewable power systems.

The defense industry is another major driver. As countries bolster their military capabilities, the need for copper in electronic devices and systems is growing. This trend is expected to continue, with defense-related copper use potentially tripling by 2040. S&P's analysis shows that the structural limits in copper mining are not keeping pace with this demand.

What Supply Constraints Are Expected to Emerge?

The report does not include potential supply from deep-sea mining, which could provide an additional source of copper. Current production, however, is already strained. Mine disruptions and production delays have contributed to higher prices, with copper hitting record highs above $13,000 per metric ton.

"Copper prices need to rise further to persuade miners to generate significant new production," said SP Angel analyst John Meyer. Many existing mines are operating beyond their initial design capacity, increasing the risk of failures like the mud rush at Indonesia's Grasberg mine.

The U.S. imports about half of its copper needs annually and has imposed tariffs on some types of the metal. These policies have led to an increase in copper stockpiling in U.S. warehouses, further exacerbating supply concerns. Analysts at Citi estimate a 308,000 ton deficit in refined copper production for 2026.

What Are the Investment Implications for the Copper Sector?

The report's findings suggest that copper producers with strong reserves and low cash costs may benefit the most from the supply-demand imbalance. Southern Copper, for example, has been highlighted as a potential winner due to its large reserves and efficient production. The company's revenue could increase significantly with a 4% rise in copper prices, given its 2026 production forecast.

For investors, the key takeaway is the need to monitor both supply-side developments and policy shifts. The U.S. government's stance on tariffs and critical mineral security could influence the market's trajectory. Additionally, the pace of technological adoption, particularly in AI and robotics, will play a crucial role in shaping long-term copper demand.

China remains the largest copper smelter, and its role in recycling and refining is expected to become increasingly important. The U.S. and other countries are also investing in domestic production to reduce reliance on foreign supply chains, but progress is likely to be slow given the time required to bring new mines online.

What Are the Broader Economic Implications?

The projected copper shortage could act as a bottleneck for global economic growth and technological advancement. Copper is essential for the development of electric vehicles, renewable energy systems, and advanced manufacturing. A shortage could slow the transition to a low-carbon economy and delay the deployment of AI infrastructure.

The report also notes that the "politics of the energy transition have changed pretty dramatically," according to Dan Yergin. This shift reflects the growing importance of national security and energy independence in global policy discussions. Countries are increasingly prioritizing the availability of critical minerals like copper to ensure economic stability and technological leadership.

The implications for investors are clear: copper is a key commodity in the transition to a more electrified and digital world. However, the market's ability to meet rising demand will depend on significant investment in mining, recycling, and policy support.