How the AI Data Centre Boom Could Threaten Global Copper
The global rise of AI is set to intensify the looming copper shortage, a crucial component in the transition to clean energy. According to recent warnings from BHP, the world's largest mining company, this development is of particular significance to the data centre industry, as it stands at the intersection of AI advancement and increasing copper demand.
Vandita Pant, Chief Financial Officer at BHP, told the Financial Times that the expansion of data centres and AI, which requires more energy-intensive computing, could increase global copper demand by 3.4 million tonnes annually by 2050.
"Today, data centres are less than 1% of copper demand, but that is expected to be 6 to 7% by 2050," Pant said. "There is a lot of copper in data centres."
BHP anticipates global copper demand will surge to 52.5 million tonnes per year by 2050, up from 30.4 million tonnes in 2021, representing an overwhelming 72% increase.
The growth of AI is reshaping energy systems and commodity demand on a global scale. The burgeoning AI sector is reshaping energy systems and commodity demand on a global scale. Copper, renowned for its high conductivity, is a crucial component in a wide array of industries and products essential for achieving net zero targets, including power cables, electric vehicles, and solar farms.
Are data centres contributing to the copper shortage?
Data centres are set to drive copper demand as they evolve to support artificial intelligence (AI) applications. These facilities, which house computer systems for data processing and storage, require substantial copper for power supply, cooling systems, and internal connectivity.
The shift towards AI is increasing energy consumption in data centres. Colin Hamilton, commodities analyst at BMO Capital Markets, a financial services provider, explains: "Data centres themselves are becoming incrementally less copper intensive, but getting the electricity to them, that is copper intensive."
This trend has spurred mining companies to secure copper assets. BHP, a global resources company, made an unsuccessful £39 billion bid for Anglo American, a multinational mining firm, earlier this year. In July, BHP partnered with Lundin Mining, a Canadian metals mining company, to acquire Filo Mining, an exploration firm with copper prospects, for US$3bn.
AI boom makes copper transformation complex
Despite long-term projections of increased demand, some analysts urge caution. One industry expert states: "We are trying to predict the future of a market that we don't really know that much about. We are at the dawn of AI, so how much AI will the world be using in 2050? We don't have any idea."
Current market conditions reflect this uncertainty. Weak demand in China, the world's largest copper consumer, has impacted prices. Copper is trading at approximately US$9,207 per tonne, 15% lower than its May peak.
BHP forecasts suggest the copper market will remain in surplus this year and next due to poor demand. However, this trend is expected to reverse towards the end of the decade.
Future outlook
In August, BHP warned of potential price volatility. The company stated that rising demand for copper "in the final third of the 2020s" could lead to a "fly-up" pricing regime as demand outpaces supply.
The mining industry faces the challenge of meeting future copper demand as the world navigates the implications of AI and the clean energy transition.
Pant, an industry executive, concludes: "The copper market is poised for significant transformation, and we must prepare for the complexities it will bring to our industry and beyond."
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