Copper Is Becoming the Oil of the AI Age

Written by Bryan Lutz, Editor at Dollarcollapse.com:

For more than a century, oil powered the global economy. It moved cars, ships, and aircraft. It fed modern farming and made mass production possible. Nations that controlled reliable oil supplies gained enormous economic and political power.

Copper may play the same role in the AI age.

Most of the stories you see out there are framed around the idea that Artificial intelligence a software revolution. But you and I, we live in the real world. We know that software runs on things that you can touch and feel. AI isn’t any different. It runs on physical hardware. Data centres need vast amounts of electricity, advanced cooling systems, backup power, and connections to the grid. All of those parts of the machine need copper.

The International Energy Agency puts data centre electricity use at 415 terawatt-hours in 2024, about 1.5% of world consumption. The base case has that figure more than doubling to 945 terawatt-hours by 2030, and reaching 1,200 by 2035. Big Government #1 will want to meet that demand. Meeting that demand means more power plants, transmission lines, transformers, and local distribution equipment.

Every part of that system uses copper.

AI is only one source of new demand. Governments are also pouring money into electric vehicles, renewable energy, battery storage, and bigger power grids. Meanwhile, military rearmament needs copper for aircraft, ships, missiles, radar, communications gear, and drones.

These industries are competing for the same metal at the same time…And it is becoming as essential to everything in the AI age as a oil is in every part of the industrial economy.

Almost a hundred years ago, oil became essential because nearly every part of the industrial economy depended on it. Copper now holds a similar position because nearly every plan for electrification depends on copper wire and copper equipment.

The supply side presents a much harder problem.

Technology companies can build new software in months, if not weeks now, but copper producers can’t build new mines in months. The timeline is longer than you’d expect…

The IEA reports that generally, a copper project typically takes 17 years to go from discovery to production. And two large copper projects, Oyu Tolgoi in Mongolia, and Quebrada Blanca 2 in Chile both ran years late and billions over budget.

Existing mines face another problem: the ore keeps getting poorer.

The average grade of a copper mine has fallen 40% since 1991. And that means companies must dig and process more rock to produce the same amount of copper. So, costs rise while output gets harder to lift.

New discoveries are also drying up. Of the 239 copper deposits found between 1990 and 2023, only 14 turned up in the past decade. Many of the deposits that do exist sit in countries with unstable politics, poor roads and power, environmental opposition, or changing tax rules. Higher copper prices may pull in investment, but they cannot conjure new production overnight.

Put the two sides together and the IEA’s own math looks like this: refined copper demand grows from about 27 million tonnes in 2024 to about 33 million tonnes in 2035. Mined supply from existing and announced projects peaks in the late 2020s at a little over 24 million tonnes, then falls below 19 million tonnes by 2035, which is about a 30% supply deficit.

The market has started to notice…

Bloomberg reported on September 7:

Copper Surges to All-Time High as Tariff Turmoil Rocks Market

Copper surged to its highest-ever price on the London Metal Exchange after a weeks-long rally fueled by anticipation that President Donald Trump will expand US tariffs to imports of refined metal… The world’s ageing fleet of big mines is struggling to keep pace with usage from data centers, renewable energy and power grids.

That was $14,533 a tonne. Tariffs are the immediate newsreel push on copper prices. But the bigger and more important influence on copper prices has been a more than two decades of underinvestment in new mines.

What that does is create a basic supply and demand conflict. Governments and corporations have announced enormous plans for AI, electrification, military production, and energy security. Yet those plans assume that enough physical material will show up to complete them.

Money alone cannot solve that problem.

Governments can create subsidies. Central banks can create currency. Technology companies can raise billions of dollars. But none of them can print copper, and none of them can shorten the 11-17 years it takes to build a mine.

That is why copper’s record high may be more than another speculative commodity rally. The price may be a warning that the world’s technological ambitions have run into its physical limits.

Oil defined the industrial age because economic growth needed energy. Copper could define the AI age because digital intelligence still needs a physical nervous system.

And that nervous system costs more to build every year.