In 2015, the United Nations adopted the Paris Agreement, aiming to reduce fossil fuel use and limit global warming. The global push for electric vehicles and green energy has unexpectedly driven copper prices higher. In 2021, Goldman Sachs published a report titled "Copper is the New Oil," highlighting this trend and the supply-demand imbalance.
Three years later, the rise of AI and the proliferation of data centers have led to a surge in copper prices this year. Bank of America predicts further price increases through 2026, with copper still considered the "new oil" by analysts.
Green industries drive copper prices higher
Copper has a wide range of uses, high thermal and electrical conductivity, is easy to process, and is a durable metal. It is widely used in daily life and is therefore often used to measure the global economic situation, earning it the nickname "Dr. Copper."
In April 2021, a Goldman Sachs report stated that copper plays a key role in achieving the Paris Agreement and reducing oil consumption globally. Clean energy sources like wind and solar power, as well as electric vehicles, all rely on copper. Goldman Sachs warned that copper prices have risen 80% over the past year due to supply not keeping pace with demand, demonstrating a lack of market preparedness.
At the time, Goldman Sachs estimated that by 2030, demand for copper from green technologies would increase sixfold to ninefold, reaching 5.4 to 8.7 million tons. However, in mid-2022, rising energy prices and pressure from rising interest rates fueled concerns about an economic recession, causing copper prices to plummet. This May, copper prices rebounded strongly, reaching an all-time high of $11,104.50 per ton on May 20th.
Jeffrey Currie, one of the analysts who wrote the report and now works for the Carlyle Group, hasn't changed his view. In a mid-May television interview, he began by saying, "Copper is the new oil."
According to Fortune, Currie pointed out that the rise in copper prices three years ago was due to green energy, and now there are three new demands: the emergence of artificial intelligence, the explosive growth of data centers, and the development of new weapons.
AI and data centers are driving copper demand again
The New York Times reported that the high-performance graphics processing units (GPUs) used in AI data centers require more energy than standard microchips. Research predicts that data centers will account for 0.5% of global electricity consumption by 2027, equivalent to Argentina's annual electricity consumption.
Copper is a primary raw material for wire and cable. Investopedia reported in May that copper prices fell in 2022, but rebounded by the end of that year due to the popularity of ChatGPT, a surge in demand for AI, and a surge in data centers. From 2024 to May, copper prices had risen by approximately 20%. Bank of America estimates that prices could rise another 17% by 2026.
Bank of America analysts said that the current market demand for electric vehicles has slowed down, but the global AI competition has prompted the construction of a large number of data centers, and copper demand continues to rise.
Recycling old electrical cables: Urban mining outperforms mining
Copper prices are rising, but increasing mine production or building new ones takes time and raises environmental concerns. Recycling has become a major source of copper. The Associated Press reported that every ton of recycled copper reduces the need for approximately 200 tons of ore mining and reduces mining pollution. Nexans, the world's largest wire and cable manufacturer, is working to increase the proportion of recycled copper it uses.
The International Copper Association states that approximately two-thirds of the copper produced in the last century is still in use, primarily in power grids, home appliances, and communications products. Once these products are scrapped, their copper can be recycled. A U.S. Geological Survey commissioner expressed hope that companies will increase copper recycling and utilize these "urban mines."
References：
*CME Group (July 31, 2020),Raga Finance Column: Who is Dr. Copper?
*Goldman Sachs (April 13, 2021),Copper is the new oil
*Business Insider (April 14, 2021),Copper is ‘the new oil’ and could reach $15,000 by 2025 as the world transitions to clean energy, Goldman Sachs says
*Fortune（2024年5月20日），‘Copper is the new oil,’ and prices could soar 50% as AI, green energy, and military spending boost demand, top commodities analyst says
*The New York Times (July11 , 2024),A.I.’s Insatiable Appetite for Energy
* Associated Press (AP, June 9, 2024),As the need for copper rises, cable manufacturers recycle more
*investopedia (May 10, 2024),AI’s Thirst for Data Center Power Feeds Renewed Demand for Coppe
Sources: Environmental Information Center
