Goldman Sachs' Bullish Case for Copper in a Decarbonizing World

In the race to decarbonize the global economy, strategic metals have emerged as foundational assets, with copper standing at the forefront. Goldman Sachs, in its report Copper is the New Oil, emphasizes the metal's indispensable role in electrification, renewable energy infrastructure, and the broader energy transition. The firm's latest research underscores a compelling investment thesis: as the world pivots toward net-zero goals, copper demand will surge, outpacing supply and driving prices higher. However, this bullish outlook is not without its challenges, including supply disruptions, geopolitical risks, and the interplay of other critical minerals like lithium and rare earth elements (REEs).

Copper: The Linchpin of the Energy Transition

Goldman Sachs' 2025 analysis highlights copper's centrality to the clean energy transition. The metal is a key enabler of technologies such as solar panels, wind turbines, and electric vehicles (EVs), with each EV requiring approximately 80–100 kg of copper compared to just 20 kg in a conventional internal combustion engine vehicle. The firm projects that global copper demand will grow by 3–4% annually over the next decade, driven by decarbonization efforts and infrastructure modernization.

Yet, supply-side constraints are tightening. A major disruption at Indonesia's Grasberg mine-the world's second-largest copper producer-has forced Goldman Sachs to revise its supply forecasts downward. The firm now estimates that global mine supply will grow by only 0.1% in 2025 and 1.3% in 2026, far below earlier projections of 0.4% and 1.8%. This imbalance has shifted the market balance from a projected surplus to a deficit, with prices potentially rising to $10,200–$10,500 per ton by year-end 2025.

Structural challenges further exacerbate the supply crunch. Declining ore grades, longer mine development timelines, and geopolitical instability in key producing regions like Chile and Peru are compounding the issue. Goldman Sachs maintains a long-term bullish stance, forecasting a price of $10,750 per ton by 2027, driven by persistent demand growth and constrained supply.

Strategic Metals Beyond Copper: Lithium and Rare Earth Elements

While copper dominates the narrative, Goldman Sachs' research also highlights the critical role of other strategic metals in the energy transition. Goldman Sachs' 2025 lithium forecast notes that lithium is essential for battery storage, with demand projected to grow by nearly 30% in 2024. However, the firm adopts a cautious outlook for lithium, anticipating a market surplus in 2025 due to oversupply and modest demand growth. To mitigate risks, Goldman Sachs advocates for "briners over miners," favoring cost-efficient brine extraction methods over traditional mining. Innovations like direct lithium extraction and claystone projects are also reshaping the landscape, though supply chain complexities persist.

Rare earth elements (REEs), vital for wind turbines and EV motors, present another layer of complexity. China's dominance in the REE industry-controlling 85–90% of global processing and refining-raises geopolitical concerns. This concentration underscores the need for diversified supply chains, as nations seek to reduce reliance on a single supplier. Goldman Sachs emphasizes that the interplay between copper, lithium, and REEs will define the resilience of the clean energy transition, with supply chain security emerging as a critical factor.

Geopolitical and Supply Chain Considerations

The clean energy transition is not just a technological shift but a geopolitical one. Goldman Sachs' "resource realism" framework highlights how critical mineral supply chains are increasingly politicized. Countries are pursuing strategies such as near-shoring, strategic alliances, and circular economy initiatives to secure access to these materials. For example, the U.S. and EU are investing in domestic mining and recycling infrastructure, while Australia and Canada are positioning themselves as alternative suppliers.

China's dominance in lithium and REE processing, however, remains a wildcard. The firm warns that geopolitical tensions could disrupt supply chains, creating volatility in prices and availability. This dynamic underscores the importance of diversification and innovation in extraction and recycling technologies.

Investment Implications

For investors, the case for copper is clear: it is a cornerstone of the energy transition, with demand growth outpacing supply and prices poised to rise. Goldman Sachs' revised forecasts, while cautious in the short term, reinforce a long-term bullish outlook. However, the firm also cautions that the transition's success hinges on the stability of other strategic metals. Lithium and REEs, while facing their own challenges, are equally vital to the clean energy ecosystem.

Conclusion

Goldman Sachs' bullish case for copper is rooted in its irreplaceable role in the decarbonization agenda. Yet, the firm's analysis extends beyond copper, recognizing the interconnected nature of strategic metals in enabling a sustainable future. As supply constraints and geopolitical risks persist, investors must adopt a holistic view of the energy transition-one that accounts for both the opportunities and challenges posed by these foundational assets. In a world racing toward net-zero, strategic metals will not just power the future; they will define it.