AI boom drives demand but investment slowdown could hit copper market, stocks: S&P Global

Growing investments in artificial intelligence (AI) are boosting global copper demand; however, a sharp slowdown in AI spending could weaken the market, slow economic growth and weigh on equities, according to an S&P Global report.

Growing investments in artificial intelligence (AI) are boosting global copper demand; however, a sharp slowdown in AI spending could weaken the market, slow economic growth and weigh on equities, according to an S&P Global report. The report highlighted that AI infrastructure is emerging as a major source of copper demand beyond its traditional use in power generation and transmission.

At the same time, “data centers could consume almost 1 million metric tons of copper this year. Their construction is also supporting demand for steel, aluminium and lead,” it stressed, citing Trafigura, a trading company. However, the rapid expansion of data centres could face challenges due to electricity shortages, with Trafigura identifying a potential gap of 50 gigawatts between planned data centre power requirements and available electricity supply by 2030. Notably, these challenges come at a time when the copper market is becoming increasingly dependent on technology-sector investments.

The report warned that “a sharp slowdown in AI investment could simultaneously weaken copper demand, construction activity, economic growth and equity markets.” The risk is particularly significant as “copper demand outside the data-centre sector will decline this year, leaving the near-term market unusually dependent on continued technology-sector spending.”

Beyond AI-related demand, the report highlighted growing supply pressures and trade-related uncertainties in the global copper market. According to S&P Global, the United States attracted approximately 900,000 metric tonnes of refined copper amid tariff uncertainty, tightening availability in other markets. However, the US Section 232 steel tariffs and the EU's

Carbon Border Adjustment Mechanism are contributing to separate regional pricing structures, it said. The report further highlighted China's significant influence over copper mining investments and refining capacity, noting that disruptions, export controls, production quotas and trade restrictions could affect prices, industrial production and technological development.

“Smelting capacity is expanding faster than new mines can be developed, intensifying competition for concentrate.” According to S&P Global, spot treatment charges in China have fallen to around minus USD 240 per metric tonne, resulting in estimated losses of USD 140 per dry metric tonne for Chinese smelters. However, smelters may continue operating to maintain copper supplies, prolonging the imbalance. Against this backdrop, “governments are pursuing domestic processing, strategic stockpiling, permitting reform, public financing and partnerships with resource-producing countries,” it said. (ANI)