A Growing Demand for Copper in Data Centers: Artificial Intelligence Accelerating an Imminent Supply Shortage
The global demand for copper, a key component in power transmission and cooling systems, is set to surge in the coming years, driven largely by the rapid expansion of AI data centers. According to a recent BloombergNEF report, the copper supply gap could swell to 6 million tonnes by 2035 if demand continues to rise at the current pace.
AI data centers, with their dense arrays of powerful servers operating 24/7, are particularly copper-intensive. Copper's excellent electrical and thermal conductivity is essential for efficient power transmission and effective cooling of these AI-intensive servers. The metal is used extensively in power cables, busbars, power distribution strips, connectors, transformers, and heat exchangers, which are critical components in running and cooling massive AI data center infrastructures.
Key factors explaining copper's intensity in AI data centers include its unmatched electrical conductivity, high thermal conductivity, widespread use in infrastructure components, durability, and reliability. The scale and intensity of AI hardware also contribute to the high demand for copper. AI data centers account for nearly 6% of their construction costs in copper, highlighting its essential role despite the metal’s high price and rising global supply concerns.
The collision of digital expansion and material scarcity due to AI-driven copper demand is set to be one of the biggest industrial challenges of the next 20 years. AI-ready data centers require massive amounts of copper all at once, pushing copper demand sharply upward alongside other sectors like renewable energy and power transmission.
Mining giant BHP predicts that copper demand will rise 72% by 2050, driven largely by AI infrastructure and the clean energy transition. By 2035, the cumulative copper locked into data centers could surpass 4.3 million tonnes. Analysts expect a long-term copper supply shortage, projecting a 6 million-tonne shortfall by 2035.
The US has imposed a 50% tariff on copper imports to boost domestic production, which could benefit major US-based miners like Freeport-McMoRan and Rio Tinto. However, mine development takes more than a decade, and the AI-driven copper crunch could arrive sooner than expected. Copper stocks like Freeport-McMoRan and the Global X Copper Miners ETF have fallen due to concerns about the combined effect of tariffs and market forecasts.
Despite the challenges, the future of copper remains promising. Copper prices plunged more than 20% after the tariff announcement, but are forecasted to peak at $13,500 per tonne in 2028. By 2035, global copper output could reach just 29 million tonnes, well below the 35 million tonnes needed.
In conclusion, the rise of AI data centers is set to have a significant impact on global copper demand. The unique combination of electrical and thermal properties, durability, and integral role in power and cooling systems makes AI data centers particularly copper-intensive. Addressing this copper crunch will be crucial for the continued expansion of AI and the clean energy transition.
Sources: [1] BloombergNEF (2021). The Copper Crunch: Electrifying the Future. [2] Macquarie (2021). Data Center Copper Demand: A Deep Dive. [3] Goldman Sachs (2021). The Electricity 2.0 Revolution. [4] BHP (2021). Copper Outlook 2021.
- To address the rising demand for copper in the AI industry, investigating and implementing effective policies focusing on clean energy and renewable energy sectors could play a significant role.
- As AI data centers account for nearly 6% of their construction costs in copper, finance sector investments in technology that reduces copper usage or alternative green solutions could potentially offset the expected copper shortage.
- Given the central role of AI and the clean energy transition in driving the demand for copper, artificial-intelligence and technological advancements that help optimize copper use or discover alternative materials with similar properties could significantly alleviate the anticipated copper scarcity.
