BHP Warns AI Boom Could Worsen Copper Shortage

The rise of artificial intelligence (AI) is set to intensify the expected shortage of copper -- crucial for the transition to clean energy -- according to warnings from BHP, the world's largest mining company.

Vandita Pant, Chief Financial Officer at BHP, told the Financial Times that the expansion of data centres and AI, which requires more energy-intensive computing, could increase global copper demand by 3.4 million tonnes annually by 2050.

"Today, data centres are less than 1% of copper demand, but that is expected to be 6 to 7% by 2050," Pant said. "There is a lot of copper in data centres."

BHP anticipates global copper demand will surge to 52.5 million tonnes per year by 2050, up from 30.4 million tonnes in 2021, representing a 72% increase.

The growth of AI is reshaping energy systems and commodity demand worldwide. Copper, a highly conductive metal, is used in a range of industries and products essential for meeting net zero targets, including power cables, electric vehicles, and solar farms.

Data centres driving copper shortage

Data centres, which house the computer systems and components necessary for data processing and storage, are expected to exacerbate the copper shortage as they adapt to accommodate AI applications. These applications use more energy-intensive chips and increase overall energy requirements.

Colin Hamilton, commodities analyst at BMO Capital Markets, explained: "Data centres themselves are becoming incrementally less copper intensive, but getting the electricity to them, that is copper intensive."

Copper is used not only to supply power to data centres but also in cooling systems and to connect processors within the centres.

The anticipated shortfall in copper supply has triggered a rush to secure access to mines. This includes BHP's unsuccessful £39 billion bid for Anglo American, a London-listed multinational mining company, earlier this year.

In July, BHP, in partnership with Lundin Mining, a Canadian metals mining company, paid $3 billion to acquire Filo Mining, an exploration company with copper prospects among its assets.

Copper transformation 'complex'

Despite the long-term projections, some analysts caution that forecasts for copper demand in data centres remain uncertain. One analyst commented: "We are trying to predict the future of a market that we don't really know that much about. We are at the dawn of AI, so how much AI will the world be using in 2050? We don't have any idea."

Current market conditions reflect this uncertainty. Weak demand in China, the world's largest consumer of copper, has weighed on prices this year. Copper is trading at approximately $9,207 per tonne, 15% lower than its peak in May.

BHP forecasts indicate that the copper market will remain in surplus this year and next due to poor demand. However, this trend is expected to reverse towards the end of the decade.

In August, BHP warned that rising demand for copper "in the final third of the 2020s" could lead to a "fly-up" pricing regime as demand outpaces supply.

As the world grapples with the implications of AI and the clean energy transition, the mining industry faces the challenge of meeting future copper demand. Pant concluded: "The copper market is poised for significant transformation, and we must prepare for the complexities it will bring to our industry and beyond."