Copper is emerging as one of the most strategically important raw materials of the coming decades, and not primarily because of electric vehicles or renewable power, as once assumed. A new projection from S&P Global points to artificial intelligence, defense, and robotics as the decisive forces that will push global copper demand roughly 50% higher by 2040. The forecast reframes the copper story away from climate policy cycles and toward a deeper, technology-driven transformation of the global economy. It also exposes a widening structural gap between how fast demand is growing and how slowly supply can realistically respond.

At the center of this imbalance is electrification in its broadest sense: not just cleaner energy, but the digitization and automation of physical systems. From data centers powering AI models to weapons platforms and industrial robots, copper is embedded at every level of this transition. The result, according to S&P’s analysis, is a demand trajectory that rises to about 42 million metric tons annually by 2040, compared with roughly 28 million metric tons in the middle of this decade. Without aggressive expansion in mining and recycling, more than 10 million metric tons of annual demand could go unmet.

Why AI is changing the copper equation

Artificial intelligence is often discussed in terms of software, algorithms, and cloud services, but its physical footprint is increasingly shaping commodity markets. Training and deploying large AI models requires vast data centers packed with servers, power distribution systems, cooling infrastructure, and high-speed connectivity. Copper is central to all of these components, used extensively in wiring, transformers, circuit boards, and thermal management systems.

Unlike earlier waves of digitalization, AI workloads are exceptionally power-hungry and continuous. Data centers designed for AI inference and training draw significantly more electricity per square meter than traditional facilities, multiplying copper intensity per unit of computing capacity. The rapid pace of investment underscores this shift: more than a hundred major data center projects were launched globally in a single year, reflecting how quickly AI infrastructure is scaling.

This matters because data centers are not discretionary in the same way consumer electronics can be. Once built, they operate continuously, locking in long-term demand for electricity and, by extension, copper. As AI applications expand across industries—from logistics and healthcare to finance and manufacturing—the metal becomes a foundational input rather than a cyclical one.

Defense and robotics add a second layer of inelastic demand

Alongside AI, rising defense spending is reinforcing copper’s strategic importance. Modern military systems are increasingly electrified, sensor-rich, and software-driven, all of which raise copper content per platform. From communications networks and radar systems to electric propulsion and autonomous vehicles, defense technology relies on reliable electrical conductivity and durability—qualities that make copper difficult to substitute.

S&P’s analysis highlights that defense demand is unusually inelastic. Governments may adjust procurement timelines, but geopolitical tensions and security commitments limit the scope for outright demand destruction. The war in Ukraine and shifts in defense policy across Europe and Asia have already translated into higher military budgets, with copper-intensive equipment forming a significant share of new spending.

Robotics, meanwhile, sits at the intersection of AI and industrial automation. As robots move beyond controlled factory environments into warehouses, hospitals, and public spaces, their electrical complexity increases. Motors, sensors, actuators, and onboard computing all require copper, adding incremental demand that compounds the pressure from data centers and defense systems.

Electrification beyond climate policy

One of the most significant aspects of S&P’s forecast is its departure from climate-policy-driven scenarios. Earlier projections often tied copper demand to the success or failure of decarbonization targets such as net zero by mid-century. The new analysis takes a different approach, assuming that electrification will advance regardless of political shifts around climate policy.

This reflects a broader reassessment of what drives energy and materials demand. Electrification is no longer solely about reducing emissions; it is about efficiency, automation, resilience, and national competitiveness. AI-enabled systems, smart infrastructure, and advanced manufacturing all favor electric solutions over mechanical or fossil-fuel-based alternatives. Copper, described by S&P vice chairman Dan Yergin as “the metal of electrification,” sits at the heart of this trend.

By decoupling demand growth from climate ambitions, the forecast implies that copper consumption will rise even in scenarios where environmental policy stalls or fragments. That makes the projected shortfall more difficult to dismiss as contingent or speculative.

Why supply cannot keep up easily

On the supply side, the constraints are structural and long-standing. Copper mining is capital-intensive, geographically concentrated, and slow to expand. Developing a new large-scale mine can take a decade or more, from exploration and permitting to construction and commissioning. Environmental regulations, water scarcity, and community opposition further complicate expansion, particularly in mature mining regions.

Today, global supply is heavily dependent on a small number of producers. Chile and Peru dominate mining output, while China plays a central role in smelting and refining. This concentration introduces geopolitical and operational risks, from labor disputes and resource nationalism to trade tensions and tariffs.

Even with higher prices providing incentives, the industry has struggled to bring enough new capacity online. Ore grades are declining at many existing mines, meaning more material must be processed to produce the same amount of copper, raising costs and environmental footprints. Recycling can alleviate some pressure, but scrap availability grows far more slowly than demand from AI infrastructure and defense systems.

Recycling and substitution offer limited relief

Recycling is often cited as a partial solution to copper shortages, and it will play a larger role in meeting future demand. Copper is highly recyclable without losing performance, making it attractive from both economic and environmental perspectives. However, recycling is constrained by the long lifespans of many copper-containing products. Wiring in buildings, power grids, and industrial equipment may remain in service for decades, limiting the flow of recoverable material.

Substitution, too, has limits. Aluminum can replace copper in some applications, particularly in power transmission, but it lacks the same conductivity and durability in many high-performance uses. For data centers, defense electronics, and advanced robotics, copper’s properties are difficult to replicate without compromising efficiency or reliability.

Strategic implications for governments and industry

The projected supply gap has far-reaching implications. For governments, copper is increasingly a strategic material, essential to economic security, technological leadership, and defense readiness. Policies that streamline permitting, support domestic mining, or secure supply chains through trade agreements are likely to gain prominence, particularly in countries that currently rely heavily on imports.

For industry, sustained tightness in copper markets could reshape investment decisions and technology design. Higher and more volatile prices may encourage efficiency gains, modular data center architectures, and greater emphasis on material recovery. At the same time, they could raise costs across sectors that depend on electrification, from consumer appliances to advanced manufacturing.

S&P’s warning is not simply about a shortage of metal, but about the pace of transformation underway. AI, defense, and robotics are accelerating demand in ways that legacy supply models were not designed to handle. Without a coordinated response—combining new mines, expanded recycling, and more resilient supply chains—the copper market risks becoming a bottleneck that constrains the very technologies driving global economic change.

What emerges from the analysis is a picture of copper as both an enabler and a limiting factor. The metal underpins the infrastructure of the AI age, yet its scarcity could slow the rollout of that future. In that tension lies one of the defining resource challenges of the next two decades.

(Adapted from SPGlobal.com)

Categories: Economy & Finance, Geopolitics, Strategy, Sustainability