Copper Scarcity Doesn't Always Mean Higher Prices

Copper is becoming increasingly scarce due to rising demand from electrification and AI data centers. However, this scarcity does not necessarily translate into higher prices, as economist Julian Simon's wager with Paul Ehrlich shows.

The wager, which took place in the late 1960s, involved selecting five commodities, including copper, chromium, nickel, tin, and tungsten. The outcome was that despite a significant increase in global population, the real prices of all five commodities fell over the ten-year period.

According to S&P Global, copper demand is expected to rise by 50% by 2040, driven by general economic growth, electrification, AI data centers, and defense. However, production from existing mines is expected to decline after 2030 due to declining ore grades, making it more expensive and complicated to extract the same quantity of copper.

Recycling can meet part of the growth in demand, but it will not be enough to cover the shortfall. Without a substantial expansion of mining, S&P forecasts a shortage of approximately 10 million metric tons by 2040.