Growing demand from AI data centers, electric vehicles, renewable energy, and electrification is set to underline the case for buying copper and copper stocks in the future.
Growing demand from AI data centers, electric vehicles, renewable energy, and electrification is set to underline the case for buying copper and copper stocks in the future.
The case for copper and copper stocks like Freeport-McMoRan (FCX -0.74%) or a copper ETF like the Global X Copper Miners ETF (COPX -1.05%) rests on the idea that demand will outstrip supply, putting upward pressure on the copper price. It's a strong argument for long-term investment in an industrial metal that's critical to the economy of the future. Here's why.
Demand will exceed supply.
According to an S&P Global report, "Copper in the Age of AI," copper demand will exceed the baseline supply, with a widening gap appearing after 2030. I've re-created a chart using the data. As you can see, copper supply is projected to start declining from about 2035, driven by pressures including:
Declining ore grades
Rising costs for energy and labor
Difficulty of acquiring permits amid environmental activist pressure
While it's not impossible that some of these pressures can be relieved or even removed, it makes sense not to bake in any assumptions that they will be until there's hard evidence they're happening.
Increasing costs and declining ore grades, notably in the U.S. and Chile, are a constant feature of mining company presentations. For example, Freeport-McMoRan's CEO Kathleen Quirk recently told investors that some of its U.S. mines had "been around for over 100 years" and now had low grades, which forces the company to prioritize efficiency, including investments in automation and technologies such as its low-cost leaching initiative.
In addition, miners are using muon technology (cosmic rays from outer space) to better identify mining deposits,
Averytin News Financial update.