High-wire act Is soaring copper demand an obstacle to future growth?

The great switch: from combustion to connection

Copper has long played a pivotal role in electricity transmission ‒ and now, too, in generation and geopolitics. A steady 2 Mtpa of additional supply is required to facilitate the shift to renewable energy over the next decade, which for some countries is less about decarbonisation and more about energy independence and security.

EVs (battery and plug-in hybrid) have reached critical mass, meanwhile, achieving 22% market penetration in 2025 and forecast to double to 44% by 2035. With EVs already consuming 1.7 Mtpa of copper in 2025, another 2.6 Mtpa will need to be brought to market by 2035 to supply the estimated 4.3 Mtpa that will be required that year, corresponding to 10% annual growth over that period.

Data centres: the volatility wild card

AI is set to consume an additional 2,200 TWh of electricity by 2035, according to global data-centre projects tracked by our Power team, lifting copper demand for grid infrastructure alone to 1.1 Mtpa by 2030. The catch: because copper accounts for less than 0.5% of total project costs, data-centre developers are largely indifferent to its price, paving the way for sudden demand surges and amplifying price volatility in an already constrained market.

A single year of doubled buildout could spark price spikes of 15% or more and swiftly deplete stocks. When high-value sectors shrug off input costs, commodity markets can lurch dramatically and unpredictably.

Defence: guns over butter

Europe's decision to boost defence spending to 3.5% of gross domestic product (GDP) amid Russia’s invasion of Ukraine and signs of wavering US security guarantees adds only modest direct copper demand of 25-40 ktpa over the coming decade. The real impact lies in infrastructure resilience and modernisation. With around 65% of copper consumed by industrial applications, even small defence-driven projects, such as power systems, networks and munitions, could boost demand beyond current forecasts.

Other major economies could follow suit. Japan, for instance, plans to double its defence budget by FY2027, heralding further upside. Defence firms around the world are signalling the expansion of various fighter programmes, missile-tracking systems and ammunition output, and flagging strong demand for advanced systems. Rising defence spending is quietly reinforcing copper’s role in the industrial-military complex, adding pressure to an already tight market.

Asia’s copper surge: from tigers to titans 

India and Southeast Asia are just warming up on the economic development front, with their industrialisation set to add 3.3 Mtpa of copper demand by 2035 (corresponding to average annual copper growth of 7.8% and 8.2%, respectively). However, if they see even half of China's development trajectory, the construction industry alone would require an additional 3.0 Mtpa of copper, with electrical networks adding another 2.4 Mtpa.

Inevitable growth with explosive upside

The long-term potential for copper growth is locked in, but the convergence of electrification, AI infrastructure, defence spending and Asian industrialisation all create multiple paths to an explosion in demand. In a supply-constrained market, however, timing is everything ‒ and various indicators point to simultaneous acceleration in numerous sectors.

The question, therefore, is not whether copper demand will grow, but whether the almost inevitable demand shocks will be manageable individually or happen all at once.

While Western companies have retreated from high-risk jurisdictions, Chinese firms continue to integrate mining, refining and manufacturing, cementing control over future copper supply chains. The rise of resource-backed competition from Russia and oil-rich Middle Eastern nations, meanwhile, adds another layer of complexity. Uzbekistan’s Almalyk Mining and Metallurgical Combine, for instance, is pursuing a US$15 billion expansion to increase copper cathode production to 400 ktpa by 2030, while Saudi Arabia’s Public Investment Fund is stepping up its ambition, buying several direct stakes in copper development globally.

Even when major Western miners do push forward, challenges persist. Barrick Gold’s long-delayed Reko Diq project in Pakistan, for example, carries a lifetime capex of US$8.83 billion, currently being financed through a consortium of international lenders, including the International Finance Corporation, the Export–Import Bank of the United States, the Asian Development Bank, Export Development Canada and the Japan Bank for International Cooperation. This reflects a broader trend: as project costs rise and geopolitical risks grow, financing is becoming more complex, increasingly reliant on multilateral support and more expensive to secure and manage. This mirrors patterns seen in upstream and other capital-intensive sectors.

Underground and under pressure

Beyond structural financing and geopolitical challenges, physical supply disruptions are an escalating concern. The industry’s move towards underground mining over the next two decades underscores the significant technical and cost hurdles involved. Codelco’s Chuquicamata is one example where an extraction ramp-up has been pushed back a full decade to 2040 due to engineering setbacks, geological challenges and pandemic-related maintenance delays.

Safety risks add another layer of complexity. Recent incidents at Grasberg (in Indonesia), Kamoa-Kakula (in the DRC) and El Teniente (in Chile) highlight the dangers of deeper, more intricate underground operations. At the same time, some producers are experimenting with sulphide leaching ‒ a technology with a limited commercial track record ‒ as an extraction method, raising questions about long-term reliability and output stability.

Compounding operational challenges are political pressures, from expropriation threats to rising resource nationalism, further clouding the investment and supply outlook.

Copper forecast: stormy with a chance of shortages

Climate change adds yet another dimension. Increasingly volatile weather patterns driven by the El Niño and La Niña weather phenomena, which often impact copper, have already caused periodic flooding and rainfall-related disruptions at major copper assets, a trend that is likely to intensify. This is something that Wood Mackenzie models using its new Synoptic database.

By our calculations, the aforementioned risks suggest that the industry may need to raise its baseline assumption for annual mine supply disruptions from 5% to 6%, effectively removing 250 to 300 kt from the market each year. That shift would heighten volatility, deepen supply shortfalls and push up copper prices during periods of strong demand.

Copper’s geopolitical fault line

The trade turmoil sparked by the Trump administration’s tariffs adds to the uncertainty surrounding miners’ investment decisions.

Copper prices, though elevated by historical standards, arguably remain too low to incentivise the scale of investment required – at least from a Western capital markets perspective. Project incentive prices might need to exceed US$11,000/t (US$5/lb), 10% above current levels, to accelerate mine development, taking into account environmental, technical or permitting challenges, and depending on the strength (or weakness) of the dollar. Without sustained higher prices or a change in the funding model, the growth needed over the next 10 to 15 years will remain out of reach.