BHP Raised The Copper Flag, Warning That AI Will Exacerbate A Shortage

What’s going on here?

BHP, the world’s biggest mining firm, warned that the rise of AI will exacerbate a looming copper shortage.

What does this mean?

Copper’s a must-have metal for many of the industries tasked with helping the world achieve net-zero emissions targets. Think renewable energy, power cables, and EVs. Problem is, producers are getting less copper out of existing mines, and firms aren’t investing enough in new sites to keep production steady – let alone ramp it up. That has many analysts predicting a shortage in the future – and according to BHP, AI will only aggravate the issue. See, the sector uses copper to build, power, and cool the data centers that AI applications rely on. In fact, BHP expects data centers to account for up to 7% of total copper demand by 2050, up from less than 1% today.

Why should I care?

Zooming in: We’re still flush – for now.

That drought is forecast for further down the line, though. Demand for copper actually looks weak right now, mainly because China – responsible for half of the world’s consumption of the metal – is contending with stuttering economic growth and a long-lasting property slump. So while BHP expects companies to be fighting over copper in the future, the mining giant expects supply to dwarf demand not just this year, but next year too.

For markets: Investors love a sale.

That weak short-term outlook has already pushed the price of copper down 15% since its peak in May. So now, Goldman Sachs expects the metal to fetch an average price of $10,100 per metric ton next year – when only four months ago, the investment bank had predicted an all-time high of $15,000. Of course, for investors who believe the longer-term forecasts, the low point could be an opportunity to buy the metal – key in both the AI and decarbonization megatrends – for a relative bargain.