By Crosswise News Think Tank Research
From LME inventories and AI calculation errors to manufacturing cost pressures, revealing structural misalignments in the era of metal financialization
In recent years, copper has been redefined as a strategic metal for global technological and energy transitions. Its price dynamics have gradually moved beyond traditional industrial business cycles, becoming a critical resource for AI computing, electric vehicles, and power grid upgrades. The market broadly believes copper is entering a long-term “supercycle,” with supply-demand tightness expected to persist for decades.
However, deeper analysis of market data and industry realities reveals structural contradictions behind the current copper price rally. Whether prices truly reflect physical demand—or have been amplified into a financial bubble by capital flows and market narratives—deserves serious scrutiny.
AI and Energy Transition Are Indeed Driving Long-Term Copper Demand
From a long-term fundamental perspective, the growth trend in copper demand is real. AI data centers require massive amounts of power transmission infrastructure and high-speed connectivity materials. Electric vehicles and charging infrastructure significantly increase copper usage per unit, while global grid upgrades and renewable energy projects further drive metal demand.
Research institutions generally estimate that global copper demand could grow by around 50% by 2040. Technology giants have also begun directly engaging in upstream mineral supply strategies, signing long-term procurement agreements with mining companies to secure critical metal supplies for AI and energy transitions.
Major Errors in AI Copper Demand Estimates Challenge Market Narratives
However, a widely cited research incident recently exposed serious risks of overestimation in AI copper demand forecasts. A previous study on data center copper usage estimated that a 1GW data center would consume approximately 500,000 tons of copper. This figure was widely quoted by media outlets and investment research institutions, forming a key pillar of the narrative that “AI will trigger a copper supercycle.”
Subsequent disclosures revealed a critical calculation error, with revised estimates showing actual copper consumption at only about 200 tons—an overestimation by more than 2,500 times. This correction fundamentally challenges prevailing market narratives.
This case demonstrates that some AI metal demand forecasting models may suffer from methodological flaws or excessive assumptions, leading to misleading expectations that are quickly absorbed into financial market narratives.
Discrepancies Between Inventory Data and “Supply Shortage” Narratives
The market’s narrative of copper supply shortages also diverges significantly from actual inventory data. London Metal Exchange (LME) data shows copper inventories rising steadily:
approximately 91,250 tons in July 2025, increasing to 141,725 tons by October 2025, and reaching 171,100 tons by January 2026.
This trend contrasts sharply with media narratives emphasizing “global copper shortages,” indicating an information asymmetry and narrative bias between market expectations and real supply-demand conditions.
Rising Financialization Increases the Risk of Price-Demand Decoupling
Another key trend is the growing financialization of the copper market. Futures funds, commodity index funds, and quantitative trading strategies have incorporated copper into global asset allocation frameworks. Price fluctuations now reflect not only supply-demand fundamentals but also U.S. dollar trends, macroeconomic policies, and market risk sentiment.
Copper is increasingly transforming from an industrial raw material into a macro-financial asset, significantly increasing the risk of decoupling between prices and physical demand.
High Copper Prices Trigger Demand Destruction and Shift Procurement Behavior
High copper prices have already exerted significant pressure on manufacturing industries. Many cable and metal processing companies have abandoned long-term price-lock contracts, instead purchasing only during price dips to reduce inventory and price risks.
Semi-finished copper products such as copper sheets, rods, and wires have seen a shift toward short-term spot purchasing.
This shift leads to shrinking transaction volumes in high-price environments, forming a classic “high price, low volume” demand destruction pattern, which is detrimental to sustainable industrial planning.
Emerging Capital Chain Risks and Rising Corporate Financing Pressures
Rising copper prices also increase corporate working capital requirements. Banks have raised margin requirements and financing thresholds, forcing some companies to post additional collateral. Higher interest costs further erode profitability, creating a negative feedback loop: price increases → financing pressure → working capital tightening.
Processing Fees and Multi-Metal Prices Rise Together, Expanding the Inflation Chain
Higher copper raw material prices have driven electrolytic copper processing fees up by 40% to 50%, while also increasing market prices for copper ingots, wires, sheets, and rods. Aluminum, nickel, lead, zinc, and iron have also become targets for investment funds, forming a cross-metal financialized inflation chain.
Media Narrative Imbalance: Overemphasis on Supply Risks, Neglect of Downstream mpacts
Recent international media coverage of rising copper prices has focused primarily on supply-side risks such as mining strikes, natural disasters, geopolitical tensions, and underinvestment in mining.
However, the structural impacts on downstream manufacturing and end-user markets have been largely overlooked.
In a high copper price environment, manufacturers face soaring costs, financing pressure, and demand contraction risks.
Analysts warn that if market narratives focus solely on supply crises while ignoring demand destruction and capital chain stress, investors and policymakers may develop a one-sided perception bias, potentially exacerbating bubble risks.
Conclusion: Copper Enters a New Era of “Strategic Metal Financialization”
Overall, the long-term demand foundation for a copper supercycle does exist. AI, energy transition, and electric vehicles will continue to drive copper demand growth. However, the AI copper demand estimation error incident, inventory data discrepancies, and financial capital-driven price surges indicate a structural misalignment between market narratives and the real economy.
The greatest risk in the copper market is no longer merely supply shortages, but the decoupling between financial pricing mechanisms and physical industrial demand. The copper supercycle is both a product of technological revolution and a potential trigger for financial bubbles and macroeconomic risks.