Data Center Copper Boom Might Have A Built In Best-By Date

Stock price rises

BHP Billiton, the world’s largest mining company, reached a peak price of A$62.72 (US$44.50) on the Australian stock market last Thursday. Rio Tinto also hit a high of A$192.68 ($136.80) on the day.

Two recent reports highlight the importance of data centers to the copper industry and the likely timeline for the end of the good times.

Investment bank Morgan Stanley said in a research report by BHP Billiton that by 2028, data center copper demand will increase from 760,000 tons this year to 1.3 million tons per year.

“Copper is a major material beneficiary of data center growth,” Morgan Stanley said.

“Power distribution equipment accounts for the majority of data center copper use, with industry estimates indicating that approximately 75% of data center copper demand is related to power infrastructure such as cables, busbars, connections and grounds,” the bank said.

The bank said data centers could account for 5.6% of global copper demand by 2029, according to an optimistic forecast from Morgan Stanley, roughly in line with demand from electric vehicles, which account for about 5.5%.

Severe supply shortages are adding to pressure on copper markets due to insufficient output from some of the world’s largest mines and signs of hoarding by countries worried about future supplies.

But the impact of continued copper price gains was offset by a report from a U.S. law firm that surveyed its clients on how long they expected the data center construction boom to last, and the unanimous answer was one to three years.

The end of the boom is in sight

Texas-based Vinson & Elkins asked infrastructure and private investors when they expected the artificial intelligence (AI) data center boom to run out of steam, and responses suggested an end was imminent.

More than half (56%) of respondents expect the boom to last another one to three years, with 33% saying they expect it to last three to five years, 6% saying more than five years and 5% saying less than a year.

The importance of the law firm’s investigation lies not in the results but in the fact that people exposed to data centers are talking about the end of the boom.

For copper miners and industry investors, the end of the data center boom heralds lower copper prices ahead, which could soon start to be reflected in share prices, especially as large mines such as Freeport McMoRan’s Grasberg project in Indonesia return to full production.

supply disruption

Morgan Stanley said mine supply disruptions will push copper output to 1.5 million tonnes, or 6.2% of global output, by 2025, while guidance has been cut by a further 320,000 tonnes so far this year.

“Additional risks arise from sulfur shortages, affecting solvent extraction electrowinning (SxEw) production in the Democratic Republic of Congo and Chile.

“At the same time, the United States has imported approximately 280,000 additional tons of copper before the Section 232 tariffs.”