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The world is facing a copper crisis that could reshape industries from artificial intelligence to renewable energy. The International Energy Agency has issued a strong warning that, without a significant expansion of global mining operations, demand for copper could exceed available supply by 30 percent within the next decade.
Markets are already feeling the strain. Copper prices have soared more than 32 percent this year, with European futures touching an unprecedented $11,705 per tonne on the London Metal Exchange.
Although copper prices typically reflect global economic activity, this increase is driven by several other factors. JPMorgan noted that while supply disruptions have contributed to the rise, the main reason for its optimistic outlook in the coming quarters is the significant global inventory imbalance and the ongoing demand for refined copper in the US.
Traders in the US, anxious about potential import tariffs under the Trump administration, have been aggressively stockpiling copper. This has created severe shortages elsewhere, draining LME warehouses to critically low levels below 100,000 metric tonnes. Such a low level of inventories typically pushes near-term prices far above longer-dated contracts, a phenomenon known as steep backwardation that tends to drive prices even higher.
Supply disruptions have compounded the problem. Unexpected shutdowns at major mines across Indonesia, Chile, and the Democratic Republic of Congo have shocked the market this year, tightening an already constrained supply chain. Meanwhile, the fundamental challenges facing copper production—declining ore quality, escalating capital costs, and lengthy development timelines for new projects—show no signs of easing.
Analysts at Citi now project copper will average $13,000 per tonne by the second quarter of next year, driven by limited mine supply growth, surging demand for artificial intelligence infrastructure, and the global energy transition.
The price increase will affect AI growth, as it is used in data centres, electric vehicles, smartphones, renewable energy installations, and power grids. Rising costs could significantly hinder the progress of technological advancements and climate initiatives.
At the heart of this crisis lies China's overwhelming dominance. The country now produces more than half of the world's refined copper, and its smelting capacity continues to expand. Chinese refineries are projected to push output to record highs in 2025, even as they drive overseas competitors from the market. The low manufacturing cost is due to smelters using existing inventories and utilising scrap metal from government consumer goods trade-in programmes.
The copper shortage began crystallising in late 2023, when mine closures coincided with rapidly expanding Chinese smelting capacity. This drove down processing fees—the compensation smelters receive for converting ore concentrate into refined metal—squeezing profitability across the industry.
The implications extend beyond market dynamics to geopolitical concerns. Many countries now worry about the resilience of their copper supply chains, given China's market control. Unless several large-scale mines come online over the coming decade, the widening deficit threatens to destabilise global supply chains and potentially stall the worldwide deployment of renewable energy capacity.
The world needs copper to power its technological and environmental future, but the metal is becoming increasingly scarce when we need it most.
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