Copper: the bottleneck in electrification
Copper has long been a barometer for the global economy. Investors followed ‘Dr Copper’ to pick up early signals of growth or stagnation. But the metal has more than outgrown that traditional role. In a world that is simultaneously electrifying, digitalising and militarising, copper has become a strategic bottleneck.
Speaking is Jonas Theyssens, Expert in Critical Commodities and Infrastructure of the Future and Portfolio Manager at KBC Asset Management.
Copper is the keystone for everything we build, load, connect and automate. Without major investment, a structural deficit of millions of tonnes a year is looming within a decade and a half.
Jonas Theyssens, Expert in Critical Commodities and Infrastructure of the Future and Portfolio Manager at KBC Asset Management
The numbers speak for themselves. By 2040, global demand for copper will increase by around 50 percent, from roughly 28 million tonnes today to more than 40 million tonnes. This growth does not come from any one source, but is the result of a confluence of structural shifts: the energy transition, the explosion of data centres and artificial intelligence, the electrification of mobility and a renewed military race. The big problem: supply is not growing at the same pace.
Why copper is such an important theme today
- Copper in our daily lives
From homes and cars to household appliances and industrial machinery, copper is the silent force in the background. Urbanisation in Asia and Africa, higher incomes and stricter building regulations continue to create strong demand for copper.
- Energy transition accelerates use
Electric cars, solar panels, wind turbines, battery storage ... they all require copper. An electric car, for example, contains up to three times more copper than a traditional car. Electricity grids around the world are being expanded and strengthened to keep up with rising demand and intensity.
- AI and data centres are gaining momentum
The explosion of artificial intelligence is leading to strong growth in data centres. These consume huge amounts of electricity and require compact and heat-resistant cabling. That is precisely where copper excels.
US data centres are expected to consume more than a tenth of total electricity demand by the end of this decade. Each additional megawatt requires not only servers and cooling, but also copper in substations, cables and grid connections.
Jonas Theyssens, Expert in Critical Commodities and Infrastructure of the Future and Portfolio Manager at KBC Asset Management
- New applications: defence and robotics
Modern communication systems, electric propulsion in defence or - looking to the future - humanoid robots: they all use a lot of copper. It shows how deeply interwoven the metal now is in emerging technologies.
Estimates for humanoid robots range from a few tens of millions to hundreds of millions, or even more than a billion. But regardless of where that number ends up, they will not only be 'smart' but above all full of wires. Humanoid robots do not run on code alone. They run on copper.
Jonas Theyssens, Expert in Critical Commodities and Infrastructure of the Future and Portfolio Manager at KBC Asset Management
Why copper is so hard to replace
Copper combines properties that few other materials possess: exceptionally high electrical conductivity, strong heat dissipation, durability, corrosion resistance and complete recyclability. Alternatives such as aluminium exist, but take up more space, are less efficient or perform worse at high temperatures. Especially in data centres, copper is therefore often ‘non-negotiable’.
Supply under pressure
Despite rising demand, the supply is hardly growing. There are several reasons for this.
- Existing copper mines are ageing and the average copper concentration in ores is steadily declining, especially in South America. That means more rock, more energy and higher costs per tonne produced. New discoveries are scarcer, deeper and more complex to mine.
- On top of this are the obstacles above ground: permits, environmental procedures, legal disputes and political uncertainty. On average, it currently takes about 17 years from discovery to production. In a market that is rapidly careering towards a shortage, that is an eternity.
- The vulnerability of copper does not stop at the mine. The next link in the chain - smelting and refining - also poses a strategic risk. These processes are highly concentrated in certain regions, with a clear centre of gravity in China. Smelters and refineries also operate with wafer-thin margins and high capital costs. Low and volatile processing fees discourage new investments, especially outside existing processing centres. The result is a paradoxical situation: even if sufficient copper ore were available, the bottleneck could shift from mining to processing.
In a world that increasingly depends on a reliable electricity supply, robust AI infrastructure and secure networks, the vulnerability of certain regions becomes a strategic concern.
Jonas Theyssens, Expert in Critical Commodities and Infrastructure of the Future and Portfolio Manager at KBC Asset Management
- Recycling offers some relief, but is not a solution on its own. By 2040, recycled copper may be able to meet a third of the global supply. Nevertheless, primary production remains indispensable to meet the growing demand.
Copper as facilitator of growth
The bigger picture is clear. No longer just a building block of the industrial economy, copper is the key to progress in an age where electrification, digitalisation and security are accelerating simultaneously. Economic growth, grid expansion, renewable energy, artificial intelligence, electric mobility and modern defence systems do not scale sequentially, but simultaneously. All these developments rely on the same physical carrier: electricity, and thus inevitably on copper.
That is precisely where the challenge lies. The world is entering a phase where demand for electricity and digital capacity is growing faster than the ability to expand the underlying materials system. Without sufficient copper, electrification slows down, AI infrastructure deployment stalls and the energy transition becomes not only more complex but also significantly more expensive.
What starts as a resource problem threatens to become a bottleneck to productivity, technology and climate policy.
Jonas Theyssens, Expert in Critical Commodities and Infrastructure of the Future and Portfolio Manager at KBC Asset Management
The question therefore is not whether copper is strategic - we are past that stage - but whether governments, industry and investors are able to scale up the supply in a timely and resilient manner. This calls for predictable policies, more efficient licensing procedures, stability in tax regimes and investments that stretch over decades. At the same time, measures are being taken to make the processing chain less concentrated and thus more resilient to geopolitical shocks.
The next few years will determine which way the balance tips. If countries succeed in reducing uncertainty and speeding up decision-making, copper can continue its role as a silent facilitator of growth. If not, copper risks turning into what it has never been before: not a warning of economic cycles, but an active brake on them. In the age of artificial intelligence and electricity grids, that is a risk the global economy can hardly afford.
Where are the opportunities within this major narrative?
In summary, the opportunities for a thematic investor interested in copper lie in:
- Electric mobility
Electric vehicles - from cars to freight - are continuing to grow globally. Charging stations and rapid charging networks are also full of copper. - Renewable energy and grid expansion
Wind farms, solar installations and larger, smarter power grids require more materials, including copper, on a structural basis. - AI infrastructure and data centres
Each new wave of data centres requires server rooms, cooling systems and grid connections. Data centres are among the fastest-growing copper consumers. - Robotics and automation
From industrial robots to humanoid robots of the future, each system includes motors, sensors and wiring. - Recycling and circular materials
The focus on circular raw materials opens up opportunities for technology that makes recycling more efficient. - Innovation in mining technology
New extraction methods, automation and lower environmental impact are a developing field.
Tomorrow's world will be dominated by copper. Electrification, digitalisation and new technologies are growing rapidly. This makes copper more than just a commodity. It is the foundation of the transitions shaping our society.
Jonas Theyssens, Expert in Critical Commodities and Infrastructure of the Future and Portfolio Manager at KBC Asset Management
Want to learn more about thematic investing?
The information contained in this publication is for information purposes only and should not be considered as investment advice.
