Will the AI Revolution Sustain Copper’s Bull Market?

While investors awaited signals from Kevin Warsh's speech at the Jackson Hole symposium last friday, copper markets remained sensitive to shifts in U.S. monetary policy and interest-rate expectations. The U.S. copper market is largely referenced to the New York COMEX benchmark, while the London Metal Exchange (LME) serves as an important global reference point. Because copper is traded internationally in U.S. dollars, movements in the dollar can affect purchasing power and investor demand. Historically, a weaker U.S. dollar has often been associated with a more supportive environment for commodity prices, although this relationship may vary over time and can be influenced by a range of other factors. At the same time, trade barriers and geopolitical competition for strategic resources continue to shape global commodity markets.

Recent price movements may also reflect conditions in the physical copper market. Relatively low inventory levels at the London Metal Exchange (LME) have heightened concerns over the availability of physical metal, while supply disruptions and limited mine capacity have constrained near-term availability. These factors are also evident in the futures markets, where the cash-to-three-month spread has widened to USD 120 per tonne in backwardation (Source: Yahoo Finance), indicating demand for immediate copper deliveries. While backwardation can indicate stronger demand for immediate delivery relative to future delivery, it does not necessarily predict future price performance.

Beyond near-term market dynamics, copper’s long-term outlook is shaped by structural demand growth. According to McKinsey, demand for data-center capacity may increase substantially by 2030, requiring major investments in power infrastructure, cooling systems and transmission networks, all of which are highly copper sensitive. 

As highlighted in the International Energy Agency’s Global Critical Minerals Outlook 2026, global copper demand is projected to increase by more than 25% by 2040, supported by trends as electrification, renewable energy deployment, electric vehicles and expanding power grids. However, future supply growth remains subject to economic conditions, policy developments, technological change and other factors that may affect consumption patterns. On the supply side, industry data indicate that average copper ore grades have declined over time, by around 40% since 1991, while new discoveries have become increasingly scarce. Only 5% of all copper deposits discovered over the past 35 years were found during the last decade. 

Compounding the challenge, bringing new mines into operation takes time. The average period from discovery to production is approximately 17 years, limiting the industry’s ability to respond quickly to rising demand. As a result, the IEA estimates that copper supply could fall roughly 25% short of demand by 2035, reinforcing concerns about a persistent structural deficit.  

Copper’s outlook continues to attract attention from investors given the potential role in electrification, digital infrastructure and other long-term economic trends. However, investors should be aware that market expectations regarding these themes may already be reflected in the current price. 

Copper trades globally in US dollars, making it sensitive to changes in US monetary policy, interest-rate expectations and movements in the dollar itself. A more hawkish Federal Reserve, stronger dollar, or weaker global growth outlook could, therefore, act as headwinds for the metal, even if the long-term outlook is positive. The combination of AI-driven infrastructure demand, electrification and constrained mine supply continues to support expectations of structurally higher copper consumption, but whether these factors will be sufficient to sustain record prices in the short term remains uncertain. Ultimately, copper’s next move may depend as much on macroeconomic developments as on the structural supply and demand, and current market expectations may support copper prices over the time. However, there can be no assurance that these factors will result in sustained price increases. Commodity prices are inherently volatile and can be affected by a broad range of economic, geopolitical, regulatory and market-specific factors.