Thousands of metals investors and executives gathered in London last week for the annual London Metal Exchange industry get-together, where the dominant story was copper and the promise that the AI revolution would keep sending the red metal to record heights. Beneath that optimism, however, traders and miners were asking a harder question: what if signs of a fading AI boom mean the great demand surge expected over the next decade does not materialise?
"It's better than even odds that AI is a bubble," said one top metals investor. A pullback in the AI growth story "will have an impact on metals prices," they admitted, adding, "Some time in 2027 something's going to hit the fan." Even growth in copper needed for remilitarisation, electric vehicles and related infrastructure would not fully replace demand estimates "if AI comes off a cliff" in the near term.
Copper is highly conductive and used in everything from cables and wiring to vehicles, consumer electronics and major construction. Huge amounts are forecast to be needed for AI infrastructure and electrification, while mines are ageing and becoming less productive. Graeme Train, head of metals and minerals analysis at Trafigura, said data centres "contributed essentially nothing to copper demand growth in 2023" but are estimated to add around 350,000 tonnes this year. Annual global demand is about 28mn tonnes, and high prices have "squeezed out demand" from non-AI sectors.
Mining majors have shifted emphasis toward copper, and markets have rewarded this, with shares in BHP and Freeport-McMoRan up by between a quarter and a third this year. BHP said in August that copper had overtaken iron ore as its primary profit driver. Some analysts, however, question whether elevated prices reflect true supply and demand or have been inflated by AI hype and US policymaking. Macquarie analyst Alice Fox said prices were running ahead of supply levels, and with AI-exposed shares under pressure, the market's record-demand expectations are now being tested.
Source: Financial Times Markets · Summarized by HeadlinesBriefing