Energy transition and data centres will likely be sources of solid copper demand growth, Australian multinational mining and metals company BHP has said. 

“The energy transition — electric vehicles and the build-out of a reliable wind and solar-based power grid — remains a key source of upside for copper beyond the traditional levers,” it said in its latest Energy and Commodity Outlook.

With electric vehicles three times as copper-intensive as internal combustion engine vehicles, BHP expects the transport sector to make up over 20 per cent of global copper demand by 2040, compared to the current 11 per cent. 

6-fold data centres’ demand growth

Earlier this year, Research agency BMI, a unit of Fitch Solutions, quoted the International Energy Agency to point out that battery electric vehicles require approximately 53.2 kg of copper, 58.1 per cent copper than the 22.3 kg needed in the production of internal combustion engine vehicles (ICEs). 

“Offshore wind, onshore wind and solar power sources require 8,000 kg, 2,900 kg and 2,822.1 kg of copper respectively, significantly more than the 1,150 kg required in coal-fired power plants. This will push the market into greater deficit and drive prices higher towards the end of the decade,” it said. 

The Australian mining and metals major said, “Data centres will be another source of solid copper demand growth, requiring vast amounts of power and cooling (which all require copper) to deliver AI-enabled services. Demand growth in this sector, currently about 1 per cent of global copper demand, could grow six-fold out to 2050.”  

The World Bank, in its commodity outlook, said the steady increase in the demand for copper, driven by energy transition technologies — particularly electricity grid infrastructure, EVs, and solar panels — is set to continue. 

Price outlook

“Copper supply growth is expected to be modest this year, limited by production stoppages and declining ore grades in major producers in South America, before picking up in 2025,” it said. 

BMI said it expects the copper market to remain in deficit in the longer term as the green transition accelerates along with the demand for “green” metals including copper. 

“In 2024, we expect prices to average $8,800/tonne, above the 2023 average as the US dollar weakens and demand outpaces supply. Beyond that, we forecast prices to reach $11,500/tonne in 2032 as the long-term structural deficit persists due to a very strong long-term demand outlook, with the market deficit climbing to 1.2 million tonnes,” the research agency said.

Currently, three-month copper contracts on the London Metal Exchange are quoted at a 10-week high of $9,720 per tonne. 

Scrap additions

Though there could be a marginal surplus in copper in 2024 and a “slightly larger but still modest” surplus in 2025, BHP expects the expected accumulation of inventory to only provide “scant coverage against anticipated deficits in the latter half of this decade”.

“If we look ahead to the second half of the decade and beyond, there are several key features of the copper value chain that give us confidence in its long-term fundamentals,” said the mining and minerals major. 

On the other hand, scrap additions should continue to outpace demand growth, rising to meet roughly half of total demand in 2050 versus around one-third today, it said. 

India’s distinction

“However, regulatory constraints, logistics and economic challenges remain as headwinds for global scrap supply, with many developing countries particularly constrained in their ability to source scrap,” BHP said. 

Last year,  the International Copper Association India (ICA India) said that through a “stock and flow model” it had found India emerging globally with one of the highest recycling rates for copper due to high collection efficiency and minimal loss during resmelting. India’s recycling rate is above 95 per cent. 

BHP said while recycled scrap will be an important source of supply to meet growing demand, primary mine supply is struggling to keep up and continues to face large-scale challenges. 

“In our estimation, the world requires about 10 million tonnes per annum of copper supply over the next 10 years, including mine life extensions and replacement for depletions. This translates to around a quarter trillion dollars in investment in the sector for the same period,” it said.

Projects in pipeline

BMI said a significant pipeline of new projects will bring additional copper to the market –particularly in Chile, Peru, Australia and Canada.

“Copper is required in almost every aspect of the green energy transition. We will also continue to see some growth in the global construction industry, a driver of copper demand unrelated to the green energy transition,” it said.

The Australian Office of the Chief Economist said new US investment in manufacturing capacity is expected to accelerate copper consumption over the outlook period to 2028. “This includes considerable spending on domestic infrastructure (mainly clean energy and EVs related manufacturing),” it said.

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