Wood Mackenzie: Geopolitical supply shocks and AI power crunch collide across global base metals

Geopolitical tensions, resource nationalism, and a growing power crunch are transforming the global base metals market, according to a recent analysis by Wood Mackenzie. With the global data center pipeline exceeding 250 GW, competition for copper, aluminum, and other strategic materials is intensifying. The impact of AI extends beyond data centers, with infrastructure like transmission networks and dedicated power generation requiring up to four times more metal than the facilities themselves, adding a new dimension of structural demand to the mix.

However, upstream investment is lagging behind, as permitting delays, geopolitical uncertainty, and rising project complexity hinder investment decisions, even with commodity prices at elevated levels. Wood Mackenzie's Vice President of Metals and Mining Research, Lindsay Grant, emphasized that while data centers present an economy-wide power infrastructure challenge, the broader issue lies in the collision between escalating demand and complex supply delivery.

The analysis identifies four structural themes shaping metals markets and investment decisions through 2036. Copper's prices have reached record highs of US$14,759 per tonne, reflecting severe dislocation in the refined market. The US stockpile has risen to over 170 days of domestic cover, while the rest of the world faces a 460 kt deficit.

Although global mine supply is projected to grow by more than 5% next year, the industry must deliver around 850 ktpa of new greenfield copper supply annually over the next decade to meet demand. Aluminium faces a significant supply shock from damage to two major smelters in the Middle East, resulting in a 1 Mt deficit in 2026 despite China's operating rates reaching 99% and Indonesia's production reaching 1.3 Mt by 2026.

While the market is expected to return to surplus in 2027, medium-term fundamentals remain supportive. Nickel is expected to rebalance in 2026, with Class 2 supply tightening from 2027 due to Indonesian production restrictions. Despite oversupply in Class 1 and weak battery demand, prices are forecast to recover towards US$19,000 per tonne by 2030, depending on Indonesian policies and sulphur supply disruptions.

Lithium and energy storage face increasing demand, with lithium carbonate prices up approximately 130% from mid-2025 lows. While raw lithium carbonate represents only 2% to 3% of turnkey storage project costs, US$150 billion to US$250 billion is required through the 2050s for further investment in the lithium supply chain, as electrification, geopolitics, and AI drive demand for energy storage solutions.