Monsters of Rock: I could be AI, but the copper behind the screen can’t

AI may not be writing this article, but it could give a major boost to copper demand
Bloomberg predicts US copper demand could lift 1.1-2.4Mt by 2030 from the needs of AI data centres
Metals stocks sink on … er … copper and gold prices

I couldn’t be AI … or could I?

I’m not, I promise, but there’s certainly enough scepticism going around with the pace at which the technology has been reinventing itself.

We’re sceptical as well that it’ll hit all the right notes when it comes to replicating the freewheeling business comedy of our surprisingly real Lunch Wrap doyen Gregor Stronach, but plenty of fields will be incorporating the next technological wave in several forms in the years to come.

Even if Nvidia investors are taking money off the table, rising AI use will mean, ironically, a run in raw materials consumption.

In places like North America, once a growing manufacturing powerhouse, copper demand actually reduced early this century.

AI could finally bring growth back to a market superseded as the copper industry’s bedrock by China.

According to research from Bloomberg Intelligence’s led by Global Head of Metals and Mining Grant Sporre and senior analyst Rob Barnett, global copper consumption will rise by 2Mt by 2030, with over half coming from the US.

Underpinning that is an expected aggressive growth in “power-hungry” AI data centres.

“Powering data centres via copper-intensive renewables and reshored manufacturing is set to spur US needs (stagnant for a decade), lifting worldwide demand to above-trend 2.7-3% annual growth,” Sporre and Barnett said in a note last week.

Copper to reverse American trend

While BI says North American copper demand fell more than 5% a year from 2000-2010, reflecting a manufacturing shift to China, trade frictions, tariffs and technological change is expected to shift this momentum in the decade ahead.

“Rapid growth in generative AI spending — driving the build-out of data centres — could spur a 3% annual increase in North American copper growth to 2035, based on analysis by BI’s telecoms, utilities and global technology teams,” Sporre and Barnett said.

“Investment in manufacturing, as part of reshoring and upgrade to aging infrastructure, has the scope to lift US and North American demand 2-2.5%, with further upside of 0.5% from AI capacity development.

“Consumption is likely to significantly outpace 2010-20’s anemic 0.4% compound annual growth, and 5%-plus decline over 2000-10.”

By 2030, data centres could add 1.1-2.4Mt of demand on the basis that each MW of power draw requires 27-33t of the red metal – between US$260,000 and US$315,000 worth.

“A study based on Microsoft’s $500 million data center in Chicago puts the copper intensity of a 1 MW facility at 27 metric tons,” Sporre and Barnett said.

“Yet as AI demands mount, so too will server-rack power density and cooling needs, potentially pushing up copper intensity too. An earlier study by Schneider Electric derived copper intensity of 66 tons a MW, yet this was based over a 10-year life cycle, with subsequent refit demand likely to be met by recycling.”

AI projections have added a layer of complexity to copper growth forecasts and could restructure the demand base, with tech heavy societies like the USA grabbing a larger share of the end user market.

That’s good for copper miners, though they require prices substantially higher than current ~US$9600/t rates – strong otherwise from an historical perspective – to justify starting new capital intensive operations.

And on the markets

The materials sector was down 0.58% and while everyone may be excited for the future of copper, weak Chinese economic data and hawkish US Fed rates talk.

Gold fell overnight, sending Aussie producers down, with copper and most base metals also in reverse.

“Much of the weakness is due to the property market. Local governments earned CNY227.4bn from selling land in May, down from CNY238.9bn in April and remaining at the lowest level since May 2016,” ANZ’s Kishti Sen, Brian Martin and Daniel Hynes said.

“Copper have back those earlier gains on the broader risk-off tone across markets. The red metal has been under pressure in recent days following weak economic data.

“The global outlook for manufacturing remains poor after flash PMIs in Europe and the US. This has been compounded by rising inventories for metals such as aluminium, copper and nickel.

“The slump in prices and demand in the nickel market was highlighted by Eramet and BASF abandoning plans to spend USD2.6bn on a nickel-cobalt plant in Indonesia.”

Those conditions were felt hard by ASX copper miners. 29Metals (ASX:29M) was struck with a near 9% drop.

Lithium stocks were on the up, with Citi saying in a note that despite short-term headwinds, they expect to see chemical prices (~US$13,000/t) improve to US$18,000-20,000/t in 2025 as the physical market rebalances in favour of producers.