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The AI investment boom was "overhyped" as a source of copper demand and less metals-intensive than its headline capital expenditure suggested, analysts from Macquarie and Mercuria said at a Bloomberg LME Week event in London on Tuesday October 20, attended by Fastmarkets.
Copper prices have been driven by US policy and constrained supply rather than by demand, panellists said at the “Unlocking new supply: is the answer higher prices or more capital?” session of Bloomberg’s “2026 Base Metals: Tonnes, Tariffs and Terawatts” event.
The panel included Alice Fox, commodities strategist for base metals at Macquarie, Gregory Shearer, head of base and precious metals strategy at JPMorgan, and Nicholas Snowdon, head of metals and mining research at Mercuria. It was moderated by Kwasi Ampofo, metals and mining specialist at BloombergNEF.
“We’re not at current price levels in base metals because of demand conditions,” Snowdon said.
He said copper was at $14,500 per tonne because of US policy, while aluminium and zinc prices had been supported by supply “going backwards” for long periods this year.
The London Metal Exchange three-month copper price closed at $14,420.50 per tonne at 5pm on Tuesday October 20, up by 0.57% from Monday’s 5pm close.
“In today’s commodity market environment, aggregate metal demand conditions are quite modest in terms of growth rate,” Snowdon added.
Snowdon described the AI capital expenditure cycle as “immense”, comparable in investment terms to another US or China. He said it had boosted global industrial production and manufacturing purchasing managers’ indices (PMIs), but metals demand had underperformed its traditional relationship with those indicators.
“AI is not as metals-intensive as the headline capex numbers suggest,” he said. “That’s not to say it doesn’t provide metals demand, but [warehouses and chips are] the main area where the capital’s been spent. It’s not on copper.”
Fox said she thought the AI boom was “overhyped”.
“Personally, I think it’s overhyped, just in terms of the sheer scale of it,” she said, citing the equipment, power and capital required.
She added that US investment in data centres was “really small” in the grand scheme of things. It was, however, one of the few areas still growing compared with the rest of the construction sector.
Shearer did not expect data centres to transform the copper balance. “We actually don’t think that AI data centres are this game changer for copper that’s going to send us into a million-tonne deficit,” he said. “But policies… are being made on a premise that whoever wins this race in AI controls the next 30 years geopolitically – and at the moment, copper is tied into that race.”
Snowdon said AI and data centres, along with the grid, remained clearly positive parts of the demand picture. He described them as long-cycle capital investments. He added that AI would provide “a very significant uplift in US copper demand over the course of the next three to five years”.
Cyclical demand subdued
Snowdon said the parts of demand tied to cyclical factors were under pressure. These included household-linked sectors in China and Europe such as construction, housing and autos.
He said a recovery in those sectors would probably need interest rates to ease, which in turn would likely require a lower oil price.
Shearer said copper demand had been resilient despite double-digit declines in Chinese construction demand for the metal. He said growth sectors such as battery energy storage systems (BESS), solar, wind and grid upgrades were helping to insulate copper from cyclical downturns.
200,000 tonnes of copper demand lost to substitution in China
Snowdon said around 200,000 tonnes of copper demand had been lost to substitution in China this year, but added that high aluminium prices had limited further switching.
“The bigger picture is less about substitution and thrifting,” he said. “It’s more about the subdued nature of cyclical demand sectors.”
A source at an Indian smelter told Fastmarkets on Monday that aluminium was already replacing copper in air conditioners, but that this would not significantly change the market because copper could not be entirely replaced.
Copper was trading at nearly five times the price of aluminium on Tuesday, with LME three-month aluminium closing at $3,002.50 per tonne.
US stockpile estimated at 1.6 million tonnes
Fox estimated that there were about 1.6 million tonnes of copper in the US, worth about $23 billion at current prices, and said it was owned by traders.
Fox added that the copper held in the US was currently free to leave the country, but that could change because export restrictions on domestically produced copper could come into force next year.
US exchange stocks were out of proportion to the country’s consumption. Comex stocks accounted for 69% of world exchange stocks, in a country that consumed about 6% of the world’s copper, Fastmarkets principal analyst Andy Cole said. By contrast, Shanghai Futures Exchange (SHFE) stocks accounted for 4% of world exchange stocks, in a country that consumed about 60% of the world’s copper, he added.
SHFE copper stocks ended September below 40,000 tonnes, while LME stocks outside the US were about 120,000 tonnes, Cole noted.
If the US increased the tariff, Fox said, prices “will just go up and up” because the market outside the US would become very tight. That would cause problems for demand and inflation more generally.
The US has imposed a 50% tariff on semi-finished copper products since August 1, 2025, but refined copper remains exempt. A presidential proclamation dated July 30, 2025 outlined a phased duty on refined copper of 15% from January 1, 2027, rising to 30% from January 1, 2028.
The US Department of Commerce was due to give the president an updated report on the US copper market by June 30, 2026. That deadline passed without a public decision, and no refined copper tariff had been announced as of early October.
Three-month copper on the LME hit an intraday all-time high of $14,875 per tonne on September 10, 2026, as metal flowed into US warehouses ahead of a possible refined copper tariff.
Snowdon said the US now had about two years of inventory cover. He described the influence of US tariff risk on the market as “one of the greatest feats of policy support for a price in commodity market history”.
He said the only way for the US to protect its inventory while keeping imports coming was to announce an escalation in the tariff rate from 2027 to 2028. Anything else, he said, would put the stockpile at risk and put import volumes under “immense pressure”.
He said he would be bullish on copper if the US adopted the “15/30” tariff outcome, referring to the phased duty outlined in the 2025 proclamation.
Shearer said the US stockpile reflected supply security concerns rather than end-use demand.
“I can’t stand here and say I know what the end game or the ultimate destination of this 1.6 million tonnes is,” he said. “In that environment, what I think you do is buy time to figure that out.”
Who smelts the concentrate?
Shearer said US supply chain security was not only about where mines were built. If a new US mine produced concentrate rather than solvent extraction-electrowinning (SX-EW) cathode, he asked, “who’s going to smelt that?” He said there was strong local community resistance to smelting operations.
He contrasted Chinese-built smelters in Indonesia, which he said could ramp up in under nine months, with the US “going in circles” over projects at home.
Fastmarkets’ copper concentrates TC implied smelters purchase, cif Asia Pacific, was calculated at $(242.00) per tonne on October 16, down by $4.05 per tonne from $(237.95) per tonne on October 9.
Fastmarkets’ copper concentrates TC implied traders purchase, cif Asia Pacific, was calculated at $(314.00) per tonne on October 16, down by $7.55 per tonne from $(306.45) per tonne on October 9.
Snowdon said it took 16 years on average to bring a copper deposit from discovery into production. That made greenfield mines a harder sell for capital than a smelter or an SX-EW plant in the Democratic Republic of Congo (DRC), which could produce within a year.
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