Copper: AI-Driven Demand Reshapes Pricing - Societe Generale

Societe Generale's Commodity Compass analysis team notes that the logic driving copper prices has shifted significantly since February 2025, with AI-related demand, arbitrage capital flows, and US trade policy replacing the traditional supply-demand framework as the core variables influencing copper prices.

**AI and Electrification Reshape Demand Structure**

Unlike demand cycles driven by traditional construction and manufacturing, data centers, advanced cooling systems, and supporting power grids are generating substantial new copper demand. This baseload demand from AI infrastructure is relatively less sensitive to short-term economic fluctuations, providing support for copper prices unlike previous cycles. Market analysts believe copper has transitioned from a cyclical industrial metal to a strategic resource closely tied to electrification and digital infrastructure.

**Tariff Policy Amplifies Arbitrage Volatility**

Uncertainty in US trade policy continues to disrupt cross-market copper pricing. Societe Generale analysts Michael Haigh and Jeremy Salem state that with Section 232 tariffs reshaping the arbitrage mechanism between COMEX and LME, copper has transformed into a policy-driven trade. Arbitrage capital flows triggered by changing tariff expectations have become a significant amplifier of recent copper price volatility.

**Supply Constraints Strengthen Long-Term Support**

Copper concentrate treatment charges and refining charges are currently near zero, reflecting persistently tightening global copper concentrate supply. The long development cycles for new copper mines, rising capital intensity, and increased regulatory constraints mean that even with copper prices remaining elevated for an extended period, sufficient supply is unlikely to be released in the short term. Structural shortages combined with AI-driven demand expansion form the basis for a medium-to-long-term bullish copper price outlook. However, the risk of demand weakening from China's economic slowdown remains a variable requiring ongoing monitoring.