Copper: Record prices with real constraints – NBC

National Bank of Canada's Kyle Dahms reports that copper has hit a new nominal record, bolstered by AI-related data centre demand, electricity grid expansion, tariff-driven stockpiling, and supply disruptions. In constant dollar terms, copper is at a 15-year high and approaching its 2011 peak, which hikes costs for power grids, AI infrastructure, and electrification projects.

The long-term demand remains fueled by AI-related data centre construction and the corresponding increase in electricity generation and grid expansion, while recent surges have been fueled by tariff-driven stockpiling and supply disruptions. A lesser-known factor contributing to copper's price rise is the curtailment of sulphur shipments through the Strait of Hormuz, driving sulphur prices over twice their January level.

Sulphur is a crucial feedstock for sulphuric acid, employed in specific processing methods. As a result, copper is presently trading at a 15-year high and is poised to surpass its 2011 peak, potentially elevating its real price to its highest point since the mid-1970s. This surge could be considered a tax on investments meant to fuel future growth, increasing the expenses of power grids, AI data centres, and other electrification projects at a time when geopolitical fragmentation is making supply less dependable.