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Copper futures hit record high amid data center expansion and electric vehicle growth

An employee scans barcodes on copper rods as they are stacked outside the Aurubis AG headquarters in Hamburg, Germany.

Krisztien Bosci | Bloomberg | Getty Images

Copper futures hit a record high on Wednesday as demand for the base metal remains strong amid a rush to build data centers and continued electrification of the global economy.

Copper prices on the NYMEX hit $5.02 per pound, according to FactSet data. The metal has gained more than 25% so far this year.

Copper demand is widely seen as an indicator of economic health, with the metal key to the energy transition ecosystem. It is an integral part of the manufacturing of electric vehicles, power grids and wind turbines, particularly as the global economy electrifies.

Copper demand from electric vehicles and the transportation sector as a whole is expected to increase about 5% this year, according to Bank of America forecasts.

Copper is also a critical material for cables used in data centers, the growth of which has fueled demand for the red metal, especially as the boom in artificial intelligence drives more need for data centers.

“As demand for electric vehicles continues to grow, albeit at a slower pace, attention has shifted to the copper needed to build data centers,” the BofA note adds.

Data centers rely on copper for various electrical applications: electrical connectors, busbars, power cables. The International Energy Agency expects data center electricity demand to more than double to more than 1,000 terawatt hours (TWh) in 2026, from 460 TWh in 2022.

The International Copper Study Group (ICSG) has reduced its oversupply forecast for the metal this year due to lower-than-expected mine production.

Copper production growth forecast for 2024 has been reduced to 0.5%, compared to 3.7% growth estimated by the ICSG in October 2023. This is mainly due to a slower production ramp-up than expected, delays in project commissioning and revised production forecasts. from major producers.

Last November, First Quantum Minerals halted production at Cobre Panamá, one of the world’s largest copper mines, following a Supreme Court ruling and nationwide protests over environmental concerns . Anglo American, a major producer, announced it would cut its copper production in 2024 and 2025 in a bid to reduce costs.

“We expect copper to rise to $10,500/t in the near term as signs of an expected physical tightening continue the recovery momentum of recent months,” Citi wrote in a report. The 3-month copper contract is trading at $10,185.5 per tonne on the London Metals Exchange.

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