These 3 Forces Will Drive the Copper Megatrend
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| By Sean Brodrick |
Copper hit another record high this month. Then it pulled back. Good!
Because while traders are busy taking profits, the forces that drove copper to record territory haven’t gone away.
In fact, some of them are getting stronger:
- Global mine supply is tightening.
- The world is embarking on an enormous buildout of electrical infrastructure.
- AI data centers are emerging as a voracious new source of demand.
- And hanging over all of it is the threat of U.S. tariffs that could scramble global copper flows all over again.
Put those forces together and I think copper’s recent pullback is exactly that — a pullback. And this bull has much further to run.
In fact, I can think of three powerful reasons why copper could ignite again.
And at the end, I’ll show you one way to play the next move.
Supply & Demand
At its core, the copper squeeze is a supply/demand story. We’ll start with supply.
According to the International Copper Study Group, world copper mine production fell 1.1% in the first half of this year.
What’s more, annual global mined production could drop this year for the first time since 2017 unless output recovers in the second half.
Why is this? To start with, copper, like all mined minerals, isn’t a renewable resource.
The old rich veins are getting mined out.
Ore grades are declining at many mature operations.
That means miners have to dig up, haul and process more rock to produce the same pound of copper.
And producers can’t just open up new mines.
New copper deposits are getting harder and costlier to extract.
For one thing, it can take 15 years — or more — to take a copper project from discovery to production.
For another, the number of new, large copper discoveries is falling hard and fast.
Copper miners can't respond to high prices the way an oil producer can drill another shale well.
It’s a long-term process of proving up reserves and planning the mine while jumping through regulatory hoops.
Also, many of the world's biggest copper-producing regions come with significant political or operating risks.
Chile is struggling with permitting, taxation, water availability, protests and other issues.
The Democratic Republic of Congo has high-grade copper, but it’s surrounded by chaos.
In Panama, the government shut down First Quantum's huge Cobre Panama operation after mass protests.
That shocked the world — and showed how quickly a major mine can disappear from world supply when political tides turn against it.
Cobre Panama is still closed, and its future uncertain.
What’s Driving Demand?
Three simultaneous forces are driving copper demand. What’s more, they build on each other, revving up demand even more.
Force #1: The Electrification of Everything and the Great Grid Buildout: Copper has always been tied to global economic growth.
That's why the metal is nicknamed “Dr. Copper.” It takes the temperature of the global economy.
But something important is changing. Copper demand is increasingly tied to the buildout of the world's electrical infrastructure.
Rising electricity consumption requires enormous investment in generation, transmission, distribution, substations and storage.
Force #2: EVs and the Electrification of Transportation: Electric vehicles (EVs) require three to five times more copper than traditional internal combustion engine (ICE) vehicles.
Charging networks require still more.
Add electric buses, trucks, rail and the grid infrastructure necessary to power them, and transportation becomes a major incremental source of copper demand.
Force #3: AI and the Data-Center Explosion: AI adds a powerful new source of demand.
Data centers require copper for power distribution, cooling, servers and electrical equipment.
AI data centers require roughly 20 to 40 metric tonnes of copper per megawatt (MW) of capacity. That’s according to World Economic Forum data.
A typical large hyperscale data center built today ranges from 50 MW to 100 MW. The math is on copper’s side.
McKinsey estimates nearly $7 trillion could be invested in data centers globally through 2030. That’s a lot of copper.
More importantly, utilities (or hyperscalers themselves) must build new generation and grid infrastructure for those data centers: power plants, substations, transformers and transmission lines.
And that circles right back to Force No. 1.
That's a recipe for higher demand and much higher prices.
How You Can Play It
Recently, I gave my Wealth Megatrends subscribers a fantastic pick to play the copper boom.
If you want to learn more, click here.
If you don’t do that, consider a copper miner ETF like the Global X Copper Miners ETF (COPX).
That lets you hold a basket of miners. It also has an expense ratio of 0.65% and a dividend yield of 2% — about double that of the S&P 500 right now.
Let’s look at the chart …
You can see that after a massive surge last year, COPX is digesting its gains.
It is coiling up for its next breakout and big move — a rally that I believe will take it to at least $132. That’s 53% higher from recent levels.
News of further disruptions in Chile, Panama or other major producing jurisdictions could spark copper’s next big rocket ride.
This is a trend we’re going to ride in Wealth Megatrends, with the BEST copper stocks. And we’re riding other commodity trends with the best gold miner and oil-leveraged stocks.
The copper megatrend is part of a larger commodity supercycle. You should take advantage of it.
All the best,
Sean
