Benchmark: Surging Copper Prices Highlight Looming Global Supply Challenges

Copper supply side increasingly tight

It would be a lie to suggest that the copper supply and demand situation is tenable.

In 2025, mining disruptions led to significant declines in output. Cruz noted that production in Q4 2024 exceeded that of any quarter in 2025; in fact, the sector lost around 1 million metric tons (MT) of output in total.

Much of the reduction was due to unforeseen situations, such as the mudslide at Freeport-McMoRan’s (NYSE:FCX) Grasberg in Indonesia, seismic events at Ivanhoe Mines’ (TSX:IVN,OTCQX:IVPAF) Kamoa-Kakula in the Democratic Republic of the Congo and worker strikes at BHP’s (ASX:BHP,NYSE:BHP,LSE:BHP) Escondida in Chile.

While the operations will eventually recover, the incidents come at a time when the copper market is increasingly tight and is expected to enter into a supply deficit in the coming years.

Cruz is predicting copper production growth of 1.5 percent in 2025, suggesting that the growth rate is behind what is expected from refined copper demand. The majority of the increase will come from mines returning to normal operations, with additional amounts from projects or expansions that began ramping up in 2025.

Cruz stated that pre-disruption growth was originally forecast at around 2 million MT in 2026, but has since been downgraded by around 700,000 MT, with the majority of the reduction coming from Escondida.

“We see that supply coming in this year will be highly skewed towards H2 as mines recover, with a 9 percent increase between Q1 and Q4, with most of this growth coming from South America, Africa and Asia, ex-China,” Cruz said.

From there, he expects growth to stabilize in 2027 at a much higher rate than this year, with Africa to experience a faster growth rate than the overall market. In the long run, Cruz predicts a compound annual growth rate of 0.9 percent between 2025 and 2035, with copper output peaking in 2033 at 27 million MT.

Copper demand drivers to watch

One of the main areas Cruz focused on was the acceleration of demand driven by the energy transition, artificial intelligence and technology. A lot of the new demand is coming from electric vehicles (EVs) — while the amount of copper in each EV is seen declining, demand growth will remain strong as sales increase.

“We do think that copper density on EVs is going to go down substantially. From 2010 to 2035, it’s going to go from 85 kilograms per unit to 64 kilograms per unit. In spite of this, we still think that copper demand from battery EVs and hybrid vehicles will grow substantially from around 2.3 million MT in 2025 to 6 million MT in 2035,” Cruz said.

It’s not just EVs, other technologies like artificial intelligence, data centers and communications are placing additional strains on the electrical infrastructure. Increasing demand for new power lines, electrical generators and energy storage is further bolstering downstream demand for copper.

“We anticipate demand from these particular sectors will grow from around 10 million MT in 2025 to 14 million MT in 2035. With most of the demand coming from energy transmission and generation,” Cruz said.

He went on to explain that transmission and generation account for 77 percent of the anticipated growth.

Cruz thinks energy demand has been overshadowed by the growth in data centers, where he suggested that copper demand will increase by only about 400,000 MT between 2025 and 2035.

“Of the growth I told you about from EVs with almost 4 million MT, or the demand from energy infrastructure with a little less than 3 million MT, it’s not that impressive. Although it still adds up to a substantial growth,” he said.

100 new copper mines by 2035?

The key takeaway from Cruz’s presentation was that a copper supply gap is developing. While he pointed out that the annual supply growth rate will come in at around 1 percent, demand is nearly double at 1.9 percent.

“This basically means that with the mines that currently exist, plus the projects that are under construction, we expect to see a difference in what needs to be mined and what will be mined in 2035 of around 7.4 million MT,” he said.

When probable projects are factored in, the supply gap narrows, but a 2.2 million MT shortfall still exists. However, these additional projects are not guaranteed. Cruz suggested that to avoid shortfalls, 100 new mines with output in the 75,000 MT range need to be built by 2035 — but this won’t be an easy task. Of the 10 largest mines in the world, only two were built after 2010; meanwhile, many of the others are decades or over 100 years old.

One reason new mines are scarce is long permitting processes, but Cruz also acknowledged that newly found large-scale deposits are at greater depths and lower grades. This has led to a scarcity of greenfield projects, with most growth coming from expansions at existing mines, a trend Cruz expects to continue over the coming years.

“Looking ahead, we expect this trend to continue to the point that we anticipate that by 2031, new production from greenfield projects will be half of what it was in 2011,” he said.

Additionally, Cruz said the copper market is becoming increasingly bifurcated, with China set to be a dominant force in both production and refinement of the red metal moving forward.

“The supply gap, or the future copper shortage, is something that the industry has been warning about for years now. The truth is, it seems not a lot of people are paying attention to it, but China has,” he said.

Cruz explained that China’s involvement in the Democratic Republic of Congo was the result of extensive planning and considerable investment. In fact, Chinese companies have collectively surpassed western producers and are securing their own supply chain.

Investor takeaway

Overall, Cruz believes the copper sector is well positioned for investment.

While he has some concern that smelting capacity is nearing saturation, he expects the situation to return to balance by 2031 and thinks that competition for concentrate will keep producer costs lower until then.

The combination of low treatment charges, high copper prices and even higher by-product gold, silver and molybdenum prices has helped increase margins and profitability for operators.

“We think that the market is in a very good position right now for miners at least. You could argue that for smelters it’s good as well despite the treatment and refinement charges, and we think that if these factors last a little bit longer, we expect some of these projects to bring the copper that humanity needs,” Cruz said.