Industrial Metals Enter Historic Necessity Cycle Driven by Supply Constraints
Global commodity markets are experiencing a significant shift as industrial metals enter their second year of what analysts call a "Necessity Cycle." This phase, driven by severe supply constraints, geopolitical tensions, and rising demand from clean energy and AI data centers, has pushed copper prices to record highs near US$14,200 per tonne. This represents a 62% increase from April 2025's low of approximately $8,500 per tonne, according to a report by Aditya Birla Capital.
The current market dynamics are marked by acute operational bottlenecks at key mining hubs, such as Indonesia's Grasberg and Chile's El Teniente, alongside negative Treatment and Refining Charges (TC/RCs). Potential import tariffs under the Trump administration could further intensify supply scarcity by pulling physical metal inventories into the United States.
Buyers are now prioritizing supply-chain resilience over raw material costs, as seen in the absorption of 50% tariffs on steel and aluminum with minimal impact on consumption. Elevated Midwest premiums for aluminum demonstrate end-users' willingness to pay higher prices to secure material availability. Analysts argue that metals remain attractively valued relative to global monetary expansion and fiscal spending, making them important strategic stores of value.
An in-house study by Aditya Birla Capital reveals that the current copper rally has substantial room for growth, with historical cycles delivering an average cumulative return of 80% to 83% over a 2 to 3-year timeframe. At roughly 17 months past its April 2025 low, the current 62% price advance is progressing in line with or ahead of historical precedents, indicating the multi-year cycle remains in its early-to-mid build-up stage.
The structural deficit in global metals traces back to 2012, when global mining capital expenditure peaked. Prolonged capital discipline left the industry with a thin pipeline of new supply projects, making it difficult to adjust quickly to sudden demand spikes driven by global megatrends like electrification and AI infrastructure.
As the Necessity Cycle broadens beyond copper into other base metals, non-ferrous producers such as HCP, NACL, VAML, HZ, VEDL, and GMDC are positioned as key beneficiaries. Additionally, cable and wire manufacturers are emerging as direct pass-through beneficiaries, capitalizing on sustained demand for power grid and wiring infrastructure.