Copper market gains support from AI, grid and defense demand

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Copper gains from AI, grids

Highlights

Copper is up 15.8% in 2026 and over 30% year-on-year, fueled by AI infrastructure, grid upgrades, and defense demand despite questions over tech spending pace.
U.S. tariff uncertainty, with a possible 15% levy from January 1, 2027, has drawn global copper stocks into the U.S., tightening supply elsewhere and boosting Chinese premiums.
Iain Pyle of Aberdeen Investments warns that copper supply cannot meet consumption growth, indicating higher and more sustained prices may be needed to balance the market.

Demand drivers support copper prices

As reported by CNBC, investors and industry executives say copper demand is being underpinned by technology infrastructure, national security needs and broader industrial investment, even as markets question whether AI-related spending can maintain its current pace. The metal is widely used in electronics, construction and transport, and its role in data centers and electrification projects is adding another layer of demand.

Copper has risen 15.8% so far in 2026 and is up more than 30% over the past 12 months, outperforming gold over both periods. Ivanhoe Electric CEO Taylor Melvin says governments, regions and industries are increasingly focused on securing metal supplies for economic growth, security and technology systems, a shift he argues is helping support prices.

Melvin says demand from hyperscale data centers is relatively insensitive to the cost of copper because major technology companies are unlikely to base large investment decisions on the metal's price alone. He also points to defense and national security budgets as another emerging source of inelastic demand, arguing that even if equity market sentiment toward tech weakens, the underlying industries continue to expand and add to copper consumption.

Tariff uncertainty and low inventories tighten the market

The market is also being supported by uncertainty over whether the U.S. will impose a tariff on refined copper. In 2025, the Commerce Department recommended a 15% tariff starting on Jan. 1, 2027, but no final public decision on the proposed levy has been announced.

Iain Pyle, senior investment director at Aberdeen Investments and co-manager of the abrdn Future Minerals Fund, says the possibility of U.S. tariffs has helped draw a large share of global copper stocks into the U.S., raising questions about how much material will remain available to the rest of the market. He adds that Chinese inventories appear exceptionally low and that premiums there are rising, reinforcing the view that supply is struggling to keep pace with demand.

In an Oct. 15 note, Pyle describes copper as the clearest example of a market where supply cannot match consumption growth. He says higher and sustained prices may be needed to create enough incentive for additional supply, and while tariff announcements could still trigger a pullback, the market's underlying fundamentals remain bullish and the risk of a sharper price spike is increasing.

In our earlier article on the U.S. AI data center boom, we covered how a surge in planned projects is running into rising financing costs, construction delays and power constraints. We also noted that investor confidence is being tested as only a portion of proposed builds appear credible, while local opposition and grid limitations add further friction to expansion. That backdrop helps frame why data-center-related copper demand may stay strong, but could be uneven if buildouts slip or costs keep climbing.

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