The Copper Paradox: Rising Inelastic Demand Meets Supply Constraints

The global copper market is undergoing a structural transformation that extends far beyond traditional commodity cycles. According to recent comprehensive analysis from S&P Global, copper has emerged as a critical bottleneck in humanity’s electrified future—a commodity increasingly characterized by inelastic demand that economic forces alone cannot easily moderate. Global copper consumption is projected to surge by approximately 50 percent over the next 15 years, climbing from roughly 28 million metric tons in 2025 to 42 million metric tons by 2040. Yet this demand trajectory collides with a more sobering reality: the world’s supply infrastructure remains fundamentally unprepared to meet this surge.

The mismatch is stark. Without substantial new investment in mining capacity and processing infrastructure, the copper market could face a deficit as large as 10 million metric tons by 2040—a shortfall that carries profound implications for the global energy transition, technological advancement, and geopolitical stability. Understanding this supply-demand misalignment requires examining the forces driving copper consumption and the structural constraints limiting supply.

Four Structural Forces Reshaping Copper Consumption

Copper demand is not monolithic. Rather, it emerges from four distinct and overlapping demand drivers that together explain both the scale and the persistence of the projected surge. Each driver operates according to different economic and policy logic, and together they create pressures on supply that are difficult to moderate through price signals alone.

The Electrification Imperative and AI’s Expanding Footprint

At the foundation of the copper surge lies electrification itself. S&P Global forecasts that global electricity consumption will rise by nearly 50 percent by 2040, outpacing growth in every other energy source. Copper is embedded throughout this electrified system: in power generation and transmission infrastructure, in the wiring of buildings and industrial facilities, in electric motors and transformers, and in the complex interconnections that bind modern power grids together.

What distinguishes the current period, however, is the acceleration of electrification driven by technological breakthroughs. Artificial intelligence has triggered what analysts increasingly describe as an “AI arms race,” centered on massive capital deployments into data centers, semiconductor fabrication, and supporting power infrastructure. Data centers have become among the most electricity-intensive facilities in the modern economy. S&P Global estimates that US data centers alone could account for as much as 14 percent of total American electricity consumption by 2030, up from approximately 5 percent in recent years.

This expansion has cascading consequences. New data centers require expanded transmission networks, additional generating capacity, and increasingly sophisticated cooling systems—all fundamentally dependent on copper. The electricity demands of AI training and inference operations create consumption pressures that exist independent of broader economic cycles or price movements, contributing to what economists term inelastic demand: consumption that persists regardless of price signals or short-term economic fluctuations.

Economic Fundamentals and Strategic Defense Priorities

Beyond the technology sector, copper remains tethered to classical economic activity. The metal known as “Dr. Copper” for its sensitivity to economic health continues to serve as the foundation of industrial demand. Construction, machinery, consumer appliances, transportation, and conventional power generation together still account for the largest share of global copper use. S&P Global projects this traditional demand segment will expand at roughly 2 percent annually through 2040, rising from approximately 18 million metric tons in 2025 to around 23 million metric tons by 2040.

Much of this growth will originate in developing economies. A particularly striking example is air conditioning: the developing world is projected to add as many as two billion new air conditioning units by 2040, each requiring substantial quantities of copper for wiring, cooling systems, and electrical components. In advanced economies such as the United States, the reshoring of manufacturing activity and grid modernization efforts are also intensifying copper demand.

The energy transition constitutes another major pillar. Electric vehicles require nearly three times as much copper as conventional internal combustion automobiles, while solar and wind installations are inherently copper-intensive technologies. In 2025, renewable sources accounted for more than 90 percent of new global power generation capacity additions. Battery storage systems, an increasingly central feature of electricity networks, add additional layers of copper demand.

A fourth demand driver—often overlooked but growing in strategic importance—stems from geopolitical competition and defense modernization. Rising international tensions and the accelerating electrification of military systems are driving governments to invest heavily in advanced defense equipment and infrastructure. Critically, defense-related demand exhibits characteristics of inelastic demand: driven by national security imperatives rather than economic optimization, governments will sustain defense spending and procurement regardless of copper prices or broader economic conditions. This policy-driven, price-insensitive consumption further tightens the global copper balance.

Geographic Divergence and the Regional Demand Picture

The global appetite for copper is not uniformly distributed. China and the broader Asia-Pacific region are expected to account for approximately 60 percent of incremental copper demand growth through 2040. This concentration reflects the region’s leading position in electric vehicle manufacturing, renewable energy deployment, grid expansion, and ongoing industrialization. North America and Europe are positioned for meaningful demand increases as well, driven particularly by AI data center proliferation, clean energy infrastructure, and transportation electrification.

The Middle East represents an additional demand growth center, with forecasts indicating one of the fastest regional growth rates in copper consumption. This acceleration reflects the region’s ambitious infrastructure initiatives and energy system investments. Yet this geographic diversity of demand offers limited supply relief, as copper supply expansion faces universal constraints.

Mining Reality: Why Supply Cannot Keep Pace

The supply side of the copper equation presents a far more constrained picture. Existing copper mines are aging, ore grades are declining, and new copper discoveries are becoming increasingly challenging and costly to develop. S&P Global notes a particularly telling statistic: the average copper mine now requires approximately 17 years to transition from discovery to commercial production. This extended timeline reflects not geological necessity alone, but the accumulation of permitting requirements, environmental assessments, and community consultation processes.

Without major new mining projects coming into production, primary mined copper supply is expected to peak around 2030 and then enter structural decline. Recycling will contribute to copper supply, yet secondary supply cannot serve as a complete solution to the impending shortage. Even under aggressive assumptions about recycling rates and recovery efficiency, secondary copper supply is projected to meet at most about 25 to 33 percent of total copper demand by 2040. The remaining supply requirement must come from newly developed or significantly expanded mining operations.

The Strategic Asset Reconsidered

These dynamics collectively frame copper as something fundamentally different from a conventional cyclical commodity. Copper has evolved into a strategic asset intrinsically linked to energy systems, technological capability, and national security interests. The demand trajectory outlined by S&P Global—driven by electrification, artificial intelligence, energy transition, and defense modernization—exhibits substantial inelastic demand characteristics that price movements alone cannot effectively moderate.

Yet this transformation in copper’s strategic status coincides precisely with structural supply constraints rooted in geology, permitting timelines, and investment requirements. Addressing this critical imbalance will require more than incremental changes to existing mining operations. S&P Global’s analysis concludes that solutions will demand greater geographic diversification of copper supply sources, enhanced multilateral cooperation on supply chain resilience, and substantial investments in both mining infrastructure and recycling technologies. Only through such comprehensive approaches can the copper supply-demand equation be rebalanced and the electrified, AI-enabled future adequately resourced.