For years, copper bulls have highlighted the critical role of copper in the green energy transition – wind turbines, electric vehicles, and power grid infrastructure all rely on it. Now, the metal is also benefiting from two major new trends: artificial intelligence (AI) and rising military spending.
Anglo American and Teck Resources' proposed $53 billion merger, the biggest mining industry M&A deal in a decade, is essentially a massive bet on future demand for this base metal. While copper consumption has grown for many consecutive years, new supply may struggle to keep pace.
AI-Driven: Data Centers Become a New Engine for Copper Demand
The rise of AI has spurred an additional copper demand frenzy. Large amounts of conductive metal are now being used in power-hungry server clusters. A single AI data center consumes as much electricity in a year as hundreds of thousands of electric vehicles do annually.
BloombergNEF research indicates that data centers will consume over 4.3 million metric tons of copper over the next decade, roughly equivalent to Chile, the world's largest copper supplier, producing for almost a year.
"Building data centers, powering them, and cooling them, all requires a lot of copper," said Anna Wiley, BHP's South Australia Copper Business Head, at a conference last month. BHP, which attempted to acquire Anglo American last year to solidify its position as the world's biggest copper producer, forecasts copper demand will grow 70% by 2050.
Military Spending: Weapon Manufacturing Adds Copper Demand Increment
Additionally, as governments increase defense spending, the manufacture of shell casings, fighter jets, missile systems, and other weaponry also requires significant amounts of copper.
The Trump administration is pressuring NATO allies to expand their defense budgets; and weapons production has become a major driver of the Russian economy.
"We have to look at copper from another angle -- the potential military demand," said Michael Haigh, head of fixed income and commodities research at Societe Generale.
Haigh estimates that if global military spending as a share of GDP rises from 2.5% currently to pre-Cold War levels (around 4%), it would add 170,000 tonnes of copper demand. In a tight copper market, this increment is not insignificant.
Haigh predicts that even without the additional demand from increased military spending, the copper market will only see a slight surplus next year. He expects global benchmark copper prices to rise from around $9,800/tonne currently to an average of $11,500/tonne in 2026-2027.
Despite Trump Policy Disruptions, Copper Prices Still Rose Year-to-Date
Although Trump's trade policies caused volatility, copper prices have generally trended upward this year. In July, after Trump said he would impose tariffs on copper, U.S. copper prices were significantly higher than global prices; then he shifted his tariff focus to copper products, and prices once again retreated, but remained up for the year.
In the United States, copper is also caught up in the overall effort to “secure the supply of critical commodities.” White House data shows that copper is the U.S. Department of Defense’s second-most-used material, and Trump has also said he wants to expand domestic copper production capacity.
Alternative Materials: Niche Products Make It Hard to Shake Copper's Dominance
Admittedly, alternative materials to copper have started to emerge. "Copper has been the best conductive material for the last hundred years, but there are better options now," says Will Reynolds. He is responsible for data center applications at MetOx International, one of a handful of companies that produce “advanced material wires” that offer far greater electrical conductivity than traditional copper wires. However, these products still only account for a small fraction of the market.
Mining M&A: Copper Assets Become the Focus, Anglo-Teck Merger Could Spur Bidding War
All of these factors are key reasons why copper has become a focus of mining M&A in recent years, and it also explains why analysts believe the proposed Anglo-Teck merger could spur rival bids, pushing companies to compete for copper resources.
In the past two years, UK-based Anglo American and Canada-based Teck Resources have each rejected multi-billion-dollar takeover offers from BHP and Glencore, respectively.
The merged company (provisionally named “Anglo Teck”) would become one of the world’s top five copper producers, with core assets located in Chile, Peru, and Canada – regions that are considered “relatively low commercial risk” markets.
“These types of copper assets are extremely attractive, as existing, high-quality assets are already scarce, and many are located in difficult-to-operate regions,” said Duncan Hay, an analyst at Panmure Liberum Brokerage.
The deal also highlights one of the key challenges to copper supply growth: For many miners, acquiring existing assets is easier and less costly than building new mines.
A large proposed copper mine in Arizona, USA, which has been in development for nearly 20 years, has faced opposition from local groups. The project was further delayed this summer, drawing the ire of Trump. “3,800 jobs at stake, and our country is desperately in need of copper -- needed now!,” he wrote on his personal social media account.
Green Energy: Low-Carbon Transition Remains the Main Driver of Long-Term Demand
It should be noted that the transition to low-carbon energy and the overall electrification of the economy remain the main drivers of long-term copper demand.
Although the Trump administration attempted to cut green energy subsidies and repeal emissions regulations, the momentum of wind turbines and solar power plants has not slowed. The promotion of electric vehicles (which require significantly more copper than gasoline-powered cars) is also continuing.
The International Energy Agency (IEA) forecasts that $2.2 trillion of global investment will flow to low-carbon energy, low-emission fuels, energy efficiency, and electrification in 2025, twice the size of investment in fossil fuels.
Benchmark Minerals Intelligence estimates that copper demand in the electric vehicle sector will rise from 1.3 million tonnes in 2025 to 2.3 million tonnes by 2030; over the same period, copper demand needed for upgrading power generation and transmission networks will rise 19% to 14.9 million tonnes.
"The copper demand from the green energy transition is still there," said Societe Generale's Haigh. "It’s just that we talk about it less these days."
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