Copper is one of those substances we take for granted, until we start adding new wires to the house, looking for a power cord for the kids' computer, or maybe buying antique copper pots.
Or, maliciously, when someone cuts the cables that run from your car's battery to the spark plugs.
But copper is a key element (a real element; periodic table symbol Cu) in the evolution of how the world migrates from the World Wide Web to artificial intelligence.
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This year, money has been pouring into copper as part of the ongoing process that results in power generation.
And demand for power generation is growing because of all the power needed for data centers, where ai applications are trained and live.
Getting power to where it is needed requires generators, transmission lines, transformers, switches, regulators and various metering devices, and that means miles and miles of wiring connecting everything.
That wiring is made of copper.
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Copper: a long history with humans
Copper has been part of human life for thousands of years.
A copper-bladed ax was found next to the mummified body of Ötzi, whose 5,200-year-old remains were found in the Alps between Austria and Italy in 1991.
The blade was sharpened periodically, but it was low-tech. It is possible that Ötzi knew that copper was too soft a metal for a weapon.
Later, craftsmen combined copper with tin and other metals to make a stronger metal: bronze. They also used copper in ceramics, paints and other products.
Copper: a gift for economic development
Since the 19th century, those involved in the development of electrical services have known that copper has another important attraction. It is an excellent conductor of electricity loved by power companies because it is relatively cheap.
The copper journey begins in the mine, when the ore is extracted. The ore is crushed and passed through chemical baths to become a concentrate, which is finally smelted into the red metal we know today and processed to form those miles and miles of wiring.
It has a big drawback. Finding decent deposits means searching all over the world.
Copper: welcome appreciation from investors
As of May 3, the price of copper on the London Metal Exchange and Chicago Mercantile Exchange has risen more than 17% this year. The Chicago close on May 3 was $4.557 a pound, up 1.6% on the day but down 2.9% from a 52-week high of $4.695 on April 30.
The US Copper Index Fund (CPER) organized to invest in the metal, rose 17.5% year-on-year.
But copper, like any industrial product, is hit by a slowdown. It fell below $2 a pound in 2008 during the financial crisis and to $2.16 in 2020 during the pandemic.
Shares of mining companies have also risen this year. The Global x Copper Miners ETF (COPX) has increased 24.4% this year (9.9% so far in the second quarter).
ETF holdings include giants like Newmont (NO) Anglo-American (NGLOY) Vale, based in Brazil (VALLEY) and Freeport-McMoRan Copper & Gold (FCX) .
So far, Anglo-American is the biggest winner of the group. Its US shares will rise 45% in 2024.
Freeport-McMoRan shares are up 18.5% and 7.3% so far in the second quarter.
Freeport, one of the world's largest copper producers, sources primarily from the Grasberg complex in the New Guinea mountains of eastern Indonesia.
The resort is located just 2 1/2 miles (4 km) west of the 16,024-foot Puncak Jaya, the highest mountain between the Himalayas and the Andes.
For nearly 30 years, in a hostile, complicated and often unpleasant physical, natural and political environment, Freeport produced billions of pounds of copper at Grasberg. And of copper ore, the Grasberg deposits have produced millions of ounces of gold, as a byproduct.
The open pit mine is a mile wide and more than 1,800 feet deep. It can be seen from space.
Those deposits are largely depleted. Freeport-McMoRan is now mining its minerals from veins it found deep underground.
Copper: boom and bust cycles
To be sure, copper is subject to boom and bust cycles.
A downturn in China that began with the Covid-19 pandemic depressed the country's need for copper. That left copper prices stagnant for several years.
It's true that mining copper (or any mineral) is, to say the least, a complicated business that involves destroying the local environment, creating fantastic amounts of waste, and using toxic chemicals.
But copper is an essential material needed to build and expand modern economies. That helps explain why China has consumed up to 30% of world production.
Profits from copper are good for copper companies, investors, miners (theoretically), technology companies and even, in small amounts, for the health of consumers.
And God knows, Tesla. (TSLA) All Chinese EV manufacturers and companies rushing to make EVs need copper wiring.
That assumes enough copper can be produced to meet what is expected to be strong, if not growing, demand, at least for the next few years and probably longer.
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In fact, metaplatforms (GOAL) CEO Mark Zuckerberg said in January that the company expected to buy 350,000 Nvidia H100 graphics processing units by the end of the year.
That means demand for more copper because an H100 GPU uses about 700 MW of energy per year. It's pretty much the same as a typical house.
And Nvidia is shipping these units as fast as its manufacturing teams can make them and is preparing to produce a new generation of faster GPUs.
Its next-generation GPU, codenamed Blackwell, will have 208 billion transistors and will be faster, less expensive to operate and more energy efficient, the company promises. The H100 unit only has 80 billion transistors.
How does that translate into energy demand?
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Developers of a data center proposed for the Portland, Oregon, area predict they will need 60 megawatts of power a year, enough to power 45,000 homes a year, the Post said. Developers are now studying “high-tech off-grid fuel cells that convert natural gas into low-emission electricity.”
Electricity companies are reworking their energy demand forecasts. They now expect to need much more power to meet the demand of massive data center developers.
These centers operate 24 hours a day to power the computers and cooling systems needed to prevent servers from overheating and failing.
So, that means more demand for copper.
By the end of 2023, Schneider Electric, (SBGSY,) The French specialist in digital automation and energy management problems estimated that the energy needed to run the artificial intelligence facilities was as large as all the energy consumed on the island of Cyprus.
And it is growing at a compound rate of 26% to 36% annually.
This means that what is used now will double in a few years, and only data centers will useai-workloads-approaches-that-of-small-country-report”> As much power as Iceland.
And that means more demand for copper.
Copper: Could demand outstrip supply?
Sounds fantastic for copper producers and refiners. However, demand could prove so great that it will exceed both copper production and the ability of power companies to supply electricity.
Analysts at Citigroup say global copper demand will exceed global production this year, The Wall Street Journal reported. The deficit will continue for the next three years.
Plans for new data centers already under construction in Northern Virginia mean stretched capacity for local utilities, the equivalent of several nuclear plants. ai-data-centers-power/”>the Washington Post reported.
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Georgia is so concerned about power shortages that it is reconsidering offering incentives to data center developers to set up facilities there.
Still, fears of power outages may not materialize.
Projects can be delayed due to permitting processes, environmental reviews and, of course, lawsuits.
Nvidia, Microsoft, Alphabet, and others have armies of engineers figuring out how to minimize the power demands of their GPUs.
But all that means is that demand for copper will be strong for the foreseeable future. It may not grow as fast as enthusiasts think, but at least it will be stable.
That means greater demand for copper and, potentially, higher prices.
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