AI Demand Drives Copper Prices Near Record Highs
Taylor Wilson
LME three-month copper hit $13,791 per tonne, within 5% of January's all-time high — the rally is not a classic economic recovery trade but a repricing driven by U.S.–China AI infrastructure spending and tightening supply on multiple fronts.
Why is copper suddenly tied to AI?
AI data centers need massive electrical infrastructure. Copper is the core conductor — more data centers means more copper.
Electric vehicles use three to four times as much copper as combustion cars. Clean energy adds another layer of demand.
This means → copper no longer moves with GDP alone. AI and clean energy have become independent price drivers, and copper's old role as an economic bellwether — "Dr. Copper" — is fading.
What is going wrong on the supply side?
Grasberg in Indonesia — the world's second-largest copper mine — slowed after a mudslide last September. Its recovery target has been cut from ~85% to ~65% of capacity.
Expectations of Trump-era tariffs on refined copper have pushed U.S. firms to stockpile early: COMEX copper inventories are up over 40% this year.
In plain terms = mines are recovering slower than expected while the U.S. is pulling copper in — the pool of freely tradable copper keeps shrinking.
Does China have enough copper?
China consumes roughly 60% of the world's copper. Shanghai Futures Exchange inventory stood at about 69,000 tonnes at end-July — a two-and-a-half-year low, down roughly 80% from its mid-March peak.
The "Shanghai premium" — Shanghai import price minus the LME price — hit $115 per tonne on July 22, the highest since November 2022.
This means → Chinese buyers are paying a steep markup to secure cargoes, a clear sign that physical supply is tight. Exports to the U.S. are widening the domestic gap — June copper-ingot imports rose to about 280,000 tonnes, a nine-month high.
China's economy is slowing — so why is copper demand still strong?
Daiwa Institute's Naoto Saito notes that China's Q2 real GDP grew 4.3% year-on-year, down from 5% in Q1 — overall domestic demand is soft.
But AI is an exception: it is a policy priority, and "this appears to be one reason copper and related resource imports are rising."
In plain terms = the broader economy is decelerating, yet the AI buildout is accelerating on its own track — and that single track is enough to prop up copper demand.
What is the key variable to watch next?
Market Risk Advisory's Naohiro Niimura argues copper is indispensable to emerging industries like AI, and concern over copper outflows is intensifying.
China's industry association said in February it is considering a commercial reserve system, but has not yet restricted copper exports.
This means → if China moves to curb copper exports, global supply tightens immediately — that policy decision is the single biggest swing factor for copper prices right now.
Content is for reference only, not financial advice.