Plugged in and politicized: Copper in a fractured world

This is a thought leadership report issued by S&P Global. This report does not constitute a rating action, neither was it discussed by a rating committee.

The rapid expansion of electrification and AI infrastructure is transforming copper and other critical minerals into strategic pillars of economic and national security. Yet supply chains remain geographically concentrated and politically exposed, amplifying vulnerabilities in an already fragmented global order. In response, governments are deploying policy levers, including export controls, strategic financing and allied partnerships, to secure access and build resilience as critical minerals shift from niche inputs of the energy transition to core instruments of geopolitical competition and economic statecraft.

While critical minerals have been an important narrative arc since the early 2000s, the rise in energy transition efforts over the past decade has spurred demand for many commodities. Among the minerals underpinning this transformation, copper occupies a uniquely paradoxical position.

In some jurisdictions, including Australia and the EU, copper has not met formal thresholds for “criticality,” owing to its relatively diversified global production base and established market liquidity. Yet its functional importance cannot be overstated. Copper is the connective tissue of electrification, embedded in power grids, electric vehicles, renewable energy systems, data centers, and the semiconductors and cooling infrastructure that sustain AI expansion.

As demand projections climb, concerns are mounting about whether new copper projects can be developed quickly enough to avoid supply deficits. Long lead times, declining ore grades, permitting delays and capital intensity compound these anxieties. Reflecting this strategic calculus, some governments have begun to recalibrate their positions. In 2025, the US moved to designate copper as a critical mineral, signaling a growing recognition that ubiquity does not preclude vulnerability in an increasingly fractured and competitive world.

In 2025, half of US GDP growth was attributed to AI spending — largely on computer chips and data center infrastructure. As data centers are electricity-intensive, their proliferation is driving investments in copper, an essential element of the electric grid systems that support them.

While AI is creating a new vector of copper demand, “core economic” electrical applications — circuit boards, connectors, and components in consumer and industrial electronics — account for most global copper consumption. Appliances such as refrigerators, air conditioners and heating systems also rely on copper for motors, compressors and wiring. With growing urbanization and rising incomes in developing economies, this segment is forecast to expand gradually.

Transportation is an increasingly important demand driver, particularly with the global push for electrification. Electric vehicles require 2.9 times more copper than a conventional car, and the number of EVs is growing.

By 2040, global copper demand is projected to rise by about 50% to approximately 42 million mt from 28.4 million mt in 2025, driven mostly by core economic demand and the energy transition (e.g., renewables, EVs, grid expansion).

Even as global demand accelerates, copper supply is on course to decline as existing resources age. Without a meaningful expansion of copper supply, the result could be a shortfall of 10 million mt by 2040.

As global demand accelerates, copper supply is on course to decline.

Meeting the growing demand is limited by above- and belowground challenges. The supply response is multifaceted but constrained:

• Mined copper (primary supply): Mining faces declining ore grades, rising costs and increasingly complex extraction conditions. Without new investment, output from existing mines will decline. The pipeline of new projects is hampered by long development timelines — averaging 17 years — due to permitting delays and aboveground risks, including regulatory uncertainty, community opposition and rising costs.
• Recycling (secondary supply): While copper’s recyclability offers relief, secondary supply alone cannot close the gap. Even with aggressive improvements in collection and processing, recycling could provide, at best, only about a third of the total supply needed by 2040.
• Processing criticality: The economics of processing are increasingly precarious, with treatment and refining charges under pressure and regional disparities in operating costs and regulatory environments. The geographic concentration of smelting and refining in China — about 50% of total capacity — amplifies China’s critical role in preserving the industry's balance.

Subsidies, sanctions and strategic stockpiles

Against a deteriorating geopolitical backdrop, security of supply for copper and other critical minerals has become a policy priority. Western governments are increasingly focused on reducing dependence on monopolistic or geopolitically sensitive suppliers by promoting domestic production, reshoring or “friend-shoring” of processing capacity, strategic stockpiling, and targeted financial and regulatory support.

In response, many governments have introduced policies aimed at diversification. Since January 2025, US President Donald Trump has adopted a three-pronged approach: accelerating permit approvals and driving “America-First” deals for domestic projects, brokering private capital and deploying public financial institutions as strategic instruments, and leveraging the Pax Silica initiative, which aims to combine capital, reserves, processing knowledge and downstream demand across allied jurisdictions.

Complementing these measures, Project Vault represents a strategic expansion of US critical mineral stockpiling, designed to build buffer inventories of copper and other essential inputs for defense systems, clean energy infrastructure and advanced manufacturing. With the intention of insulating key sectors from sudden supply disruptions, export controls or geopolitical coercion, Project Vault embeds resource resilience at the core of American industrial strategy.

The EU introduced its Critical Raw Materials Act to accelerate domestic mining, processing and recycling while securing strategic partnerships abroad. Japan and South Korea have also pursued long-term offtake agreements and overseas investments. Resource-rich countries, meanwhile, are increasingly asserting greater control over their mineral endowments through export restrictions and local processing requirements.

The result is a more fragmented and politicized market. Export controls, investment screening and industrial subsidies have become more common, and competition for access to deposits in Africa, Latin America and Southeast Asia has intensified. At the same time, companies face pressure to meet higher environmental, social and governance standards, particularly in jurisdictions associated with governance or human rights risks.

Looking ahead, the geopolitical contest over copper is likely to deepen as electrification, AI infrastructure and defense modernization drive demand growth. Supply expansion is capital-intensive and slow, often constrained by permitting delays and community opposition, which increases the strategic leverage of existing producers. As a result, critical minerals are evolving into core instruments of economic statecraft, sitting at the intersection of energy security, industrial competitiveness and geopolitical influence.