Along with gold and silver, the price of copper is soaring. But unlike the two precious metals, copper prices are rising for economic reasons, not political.
Since the beginning of the year, the supply and demand picture for copper has tightened significantly. Supply has declined because of disruptions at the Grasberg copper mine in Indonesia, the second largest in the world. A fatal mudslide will keep this mine closed until the second quarter of 2026. Production from a major mine in Chile has also fallen due to operational problems.
At the same time, demand for copper is rising rapidly because of the artificial intelligence revolution and the electrification of the United States and global economies. Copper demand is driven by its wide range of uses. It has high electrical conductivity. As the flow of electrons increases, energy efficiency rises. Copper is durable, relatively affordable, and is a key input in electrical grid infrastructure, electric vehicles, solar panels, and wind turbines.
AI servers have much higher electricity requirements than traditional data centers. This increases demand for copper. BHP, the world’s largest mining company, says the amount of copper used in data centers will increase sixfold by 2050. The International Energy Agency says that by 2035, global copper production will meet only 70% of global demand. Copper producers are racing to increase their reserves.
Copper prices are up by 30% this year. When prices rise, new sources of supply come online. Supply is elastic. Copper can be recycled repeatedly. High copper prices increase the supply of recycled copper.
Intriguingly, in Arizona, copper miners are using sulphuric acid and bacteria to bring the first new domestic copper production online in more than a decade. Gunnison Copper, in partnership with Rio Tinto, a major Anglo-Australian mining conglomerate, is using microbes to strip copper from ores that were previously uneconomical to mine. Advances in mining technology have made it viable to open up marginal deposits in copper-rich Arizona.
The Gunnison-Rio Tinto project is one of several in the state racing to produce copper through leaching technology. This technology produces ready-to-use slabs of copper. The U.S. has abundant reserves of copper in the ground. Leaching technology will enable domestic producers to increase their output. Leaching will not replace large-scale open-pit mining, but it will unlock large volumes of low-grade deposits.
Copper is a critical mineral for U.S. national security and for a strong economy. The effort to increase production from low-grade deposits is similar to the shale oil and natural gas revolution. U.S. engineers figured out how to fracture shale rock formations that held billions of barrels of oil and vast quantities of natural gas. Copper leaching holds similar potential.
Copper leaching is especially important because it can take a decade or more for federal permits to be issued for a new mine. Producers are searching for shovel-ready deposits. An executive involved in the Gunnison-Rio Tinto project says that, of all the copper in the ground globally, 70% is contained in primary sulfides. This is the mineralogy that copper miners are trying to unlock. Copper leaching will be a key source of new production.
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The U.S. currently imports about 50% of the refined copper it consumes. Increasing domestic production reduces dependence on foreign suppliers at a time when global markets are tightening. It also increases national security. Unless federal permitting becomes faster and more predictable, the U.S. will be dependent on technological innovations to expand domestic copper production.
Regardless, copper prices are likely to remain elevated because new supply takes years to reach the market while demand from AI and electrification continues to rise.
James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He publishes a daily Substack on financial markets, politics, and society. He can be followed on X and reached at [email protected].