# How Data Centers Are Fueling a Global Copper Crunch

An episode of [Switched On](https://invisiblenetwork.ai/podcast/1469286286), 24 Sep 2025, 29 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/01a10738-3608-4dec-883c-ae3c00026b36/071b3e49-2f44-44f0-bd36-b361015081bc/audio.mp3?utm_source=Podcast&in_playlist=6d114f63-833d-4b78-bbf5-ae3c00026b44

Copper is a cornerstone of the world’s infrastructure. From transportation to the energy transition to massive new data centers, demand for the metal is everywhere, and supply is feeling the crunch. Copper demand is forecast to outstrip supply by 6 million metric tons a year come 2035, but at the same time, market economics are limiting exploration and some mines are even closing up shop. So who is going to win, and who may lose out, in the global battle for a limited critical resource? On today’s show, Tom Rowlands-Rees talks with Rosemary Katz, a senior associate from BNEF’s metals and mining team, about her note “Tracking Copper in Data Centers 2025-2035: Supply Crunch.” Complementary BNEF research on the trends driving the transition to a lower-carbon economy can be found at BNEF<GO> on the Bloomberg Terminal or on bnef.com Links to research notes from this episode: Tracking Copper in Data Centers 2025-2035: Supply Crunch - https://www.bnef.com/insights/37209 See omnystudio.com/listener for privacy information.

## Transcript

[0:00] Speaker 1: This is Tom Rowland's Reese and you're listening to Switched
[0:02] Speaker 1: on the B and EF podcast. Copper may be one
[0:05] Speaker 1: of our most underappreciated metals. Essential for transport, construction and
[0:09] Speaker 1: the manufacturing of consumer goods. Is also critical for the
[0:12] Speaker 1: parer and electric vehicle sectors that make up the cornerstone
[0:15] Speaker 1: of the energy transition. The supply and demand balance of
[0:17] Speaker 1: the mineral is already worryingly tight, but with increasing demand growth,
[0:21] Speaker 1: we could see a shortage of copper suppli as soon
[0:23] Speaker 1: as twenty twenty eight and the six million ton deficit
[0:25] Speaker 1: by twenty thirty five. Meanwhile, data center rollout is gathering
[0:29] Speaker 1: pace across the planet, and those huge facilities all require
[0:32] Speaker 1: you guessed it, lots and lots of copper. With so
[0:35] Speaker 1: much demand, you'd logically expect that miners would be falling
[0:38] Speaker 1: over themselves to explore for the mineral and open up
[0:40] Speaker 1: new mining facilities, but actually the reverse has been happening.
[0:43] Speaker 1: Economic concerns mean that companies are leaning into keeping old
[0:46] Speaker 1: minds up and running rather than starting new ones, and
[0:49] Speaker 1: in some cases minds are even being closed. So just
[0:52] Speaker 1: what is it about this metal that runs counter to
[0:54] Speaker 1: common logic and what is its near term demand outlook.
[0:57] Speaker 1: Today I'm joined by Rosemary Cats, a senior associate from
[1:00] Speaker 1: BNF's Metals and Minings team. We discussed the findings from
[1:03] Speaker 1: her note tracking copper and data centers twenty twenty five
[1:05] Speaker 1: to twenty thirty five supply crunch, which BNF clients can
[1:09] Speaker 1: find at BNF go on the Bloomberg terminal or on
[1:12] Speaker 1: BNF dot com. All right, let's get to talking about
[1:14] Speaker 1: copper supply constraints and the growing demand from data centers.
[1:17] Speaker 2: With Rose Rose Welcome to the podcast.
[1:28] Speaker 3: Thank you Tom for having me.
[1:30] Speaker 1: So copper is what we're talking about today, and we
[1:34] Speaker 1: have our Metals and Mining team, which you're part of,
[1:36] Speaker 1: of course, and a lot of the time you're talking
[1:38] Speaker 1: about sort of metals like lithium and cobble less everyday metals.
[1:43] Speaker 1: You know, everyone is familiar with copper. In some senses,
[1:46] Speaker 1: it seems a little bit unsexy because there's nothing new
[1:48] Speaker 1: about it. So why are we talking so much about copper?
[1:51] Speaker 1: Why does it matter?
[1:53] Speaker 3: Well, Tom, copper is becoming sexier again, and mainly because
[1:57] Speaker 3: of the rapid buildout of data center infrastructure across the world,
[2:01] Speaker 3: and also the other sexier part, as you put it,
[2:04] Speaker 3: is the fact that there's not enough material that is
[2:07] Speaker 3: being mined and refined to actually support all this copper
[2:11] Speaker 3: infrastructure from your traditional sectors like manufacturing, to the energy
[2:15] Speaker 3: transition itself, and now for data centers. That's why it's
[2:19] Speaker 3: all a buzz at this point in time.
[2:21] Speaker 1: So that's kind of a new buzz around it because
[2:24] Speaker 1: of data centers can just talk about the other ways
[2:27] Speaker 1: in which copper is important, because I imagine that if maybe
[2:30] Speaker 1: a shortage of copper supply because of this data center demand,
[2:33] Speaker 1: there might be other areas that are impacted by that.
[2:37] Speaker 3: Yeah, so the story is just not about data centers. So,
[2:39] Speaker 3: as I said, demand from an absolute point of view
[2:43] Speaker 3: is basically it comes from your traditional sectors, right the
[2:46] Speaker 3: largest sector of that demand, which includes construction, manufacturing, electronics,
[2:52] Speaker 3: internal combustion vehicles. They already take up a lot of
[2:56] Speaker 3: that copper demand and require a lot of supply in turn.
[3:00] Speaker 3: And then we have as the energy transition that is
[3:03] Speaker 3: electrification through electric vehicles, through battery storage, through the buildout
[3:08] Speaker 3: of wind and solar. They also require copper, and the
[3:12] Speaker 3: energy transition is actually one of the fastest growing markets
[3:15] Speaker 3: right now. Data centers, in essence, are competing with these
[3:18] Speaker 3: two massive industries for this limited supply at the end
[3:21] Speaker 3: of the day.
[3:22] Speaker 2: See, it's amazing.
[3:23] Speaker 1: It sounds like copper is both an important part of
[3:26] Speaker 1: the past and an important part of the future, both
[3:29] Speaker 1: in terms of the energy transition and areas like artificial intelligence.
[3:34] Speaker 1: It almost feels like we've been taking copper for granted
[3:38] Speaker 1: for years, and now we're beginning to find out that
[3:41] Speaker 1: that was not the right way to think about copper.
[3:44] Speaker 3: That's actually quite true, and it's not that, you know,
[3:46] Speaker 3: we've been taking it for granted, more like it's not
[3:49] Speaker 3: been kept in the limelight so that we stay abreast
[3:53] Speaker 3: of this risk that's ever looming. If we look back
[3:56] Speaker 3: in history, big copper producers have you know, published notes
[4:00] Speaker 3: of work to say, hey, we're struggling globally and prices
[4:04] Speaker 3: at the end of the day, I have signaled that
[4:06] Speaker 3: quite obviously. I mean, copper prices on the first of
[4:09] Speaker 3: August was at nine six hundred dollars per ton. It's
[4:13] Speaker 3: gone up to about nine nine hundred recently. So that's
[4:17] Speaker 3: a clear signal that there's a problem here, and that
[4:20] Speaker 3: can be attributed to the lack of supply that's coming
[4:22] Speaker 3: through the system.
[4:24] Speaker 2: So let's talk about the supply.
[4:26] Speaker 1: Where is all of this copper that we don't have
[4:29] Speaker 1: enough of, where is it coming from?
[4:31] Speaker 3: So supply currently mainly comes from South America, Chile, Peru,
[4:36] Speaker 3: and then the US and Australia also produce copper. Similarly,
[4:40] Speaker 3: in Africa, we have the DRC in Zambia also producing
[4:44] Speaker 3: copper or or copper concentrate, and then refining the material
[4:48] Speaker 3: into a useful form is mostly done in China. So
[4:51] Speaker 3: China actually is responsible for about forty percent of refined copper,
[4:56] Speaker 3: and then the rest comes from South America, the US,
[4:59] Speaker 3: Australia and the DRC.
[5:01] Speaker 1: So let me just make sure I've understood you correctly
[5:04] Speaker 1: here it sounds like a lot of the copper refining
[5:08] Speaker 1: is happening in China and then everywhere else it's happening where.
[5:12] Speaker 2: The minerals are being pulled out of the ground. Roughly.
[5:15] Speaker 1: Yeah, and you might have already said this is China
[5:18] Speaker 1: got its own source of copper minerals or is that
[5:20] Speaker 1: something that is lacking.
[5:22] Speaker 3: China's got its own source, but it does import those
[5:25] Speaker 3: copper concentrates from these regions for refining.
[5:28] Speaker 1: So I suppose what's interesting is when I think about it,
[5:31] Speaker 1: the countries or regions that are missing from that list.
[5:34] Speaker 1: You know, the United States has big plans around data centers.
[5:38] Speaker 1: They are neither a producer or a refiner of copper
[5:42] Speaker 1: in a big way.
[5:43] Speaker 3: No, So they are actually a producer and refiner. They
[5:46] Speaker 3: just don't have sufficient domestic supplies to keep up with
[5:50] Speaker 3: the domestic demand at this point in time.
[5:53] Speaker 2: Got it?
[5:53] Speaker 1: So in your research on this, I think one of
[5:55] Speaker 1: the things that came up is that copper minds have
[5:58] Speaker 1: been shutting down, which naively doesn't make any sense given
[6:03] Speaker 1: what we're saying.
[6:04] Speaker 2: So what's the story with that?
[6:06] Speaker 3: So it's a two pronged story. So we have one
[6:09] Speaker 3: issue from an economic standpoint. Currently, a lot of like
[6:13] Speaker 3: the good copper, high grade oxide copper has been mined
[6:17] Speaker 3: out quite extensively and we're left with the more lower
[6:19] Speaker 3: grade material.
[6:21] Speaker 1: This is a new concept to me, good copper and
[6:23] Speaker 1: bad copper. Can you just talk through what good copper
[6:25] Speaker 1: and bad copper is?
[6:27] Speaker 3: So good copper is basically a material that comes from
[6:31] Speaker 3: what we call oxide ore or oxide that's mined out,
[6:35] Speaker 3: and those are higher grade material, whereas bad copper are
[6:39] Speaker 3: your lower grade materials. So high grade stuff is easy
[6:42] Speaker 3: to process, to refine, to move through the system, whereas
[6:45] Speaker 3: your lower grade material it's harder to mine. One you
[6:48] Speaker 3: have to remove more waste to get to the ore,
[6:51] Speaker 3: and then it's harder to refine because you have all
[6:53] Speaker 3: this what they call deleterious material or gang waste that
[6:57] Speaker 3: you need to remove so it can go through the
[6:59] Speaker 3: same finding process, and that makes for higher operational costs.
[7:04] Speaker 3: So most of what we're finding out is the bad copper.
[7:07] Speaker 1: Just to make sure I've understood this correctly, the end
[7:09] Speaker 1: product is the same in terms of quality. It's just
[7:13] Speaker 1: I suppose you could say good copper is the low
[7:15] Speaker 1: hanging fruit and bad copper is a high hanging fruit,
[7:17] Speaker 1: and most of the low hanging fruit has already been picked.
[7:20] Speaker 3: Yes exactly. That's that's a great way to put it
[7:23] Speaker 3: for the listeners. And because of that, you have to
[7:25] Speaker 3: climb higher up the tree, right, That takes a lot
[7:27] Speaker 3: more material, And because of the operational costs are going up,
[7:32] Speaker 3: minds are kind of moving away from these operations with
[7:35] Speaker 3: economics just don't make sense. And then the second issue
[7:38] Speaker 3: on top of that is ESG. So from an ESG perspective.
[7:43] Speaker 3: In South America, a lot of the issues that minds
[7:45] Speaker 3: have been facing is water scarcity. And even though the
[7:49] Speaker 3: companies like bhp I've come up with solutions like using
[7:52] Speaker 3: desalination to fill that gap of water scarcity, it's just
[7:55] Speaker 3: not being enough. Desalinating seawater is very expensive, so that's
[8:00] Speaker 3: why we've seen BHPS Cero Colorado mine in Chilling twenty
[8:04] Speaker 3: twenty three shutdown because it was just too expensive to
[8:07] Speaker 3: d salnate. And then we also saw in Panama It's
[8:10] Speaker 3: Cobra Panama mine closed down because of these environmental issues
[8:15] Speaker 3: and protests, and this trend is quite pervasive. You see
[8:18] Speaker 3: it in the US right now. There's a copper project
[8:20] Speaker 3: that has been in process for twenty years now, but
[8:24] Speaker 3: because the communities are not comfortable with the fact that,
[8:27] Speaker 3: you know, these minds have put together strategies to protect
[8:30] Speaker 3: the environment, to protect them at the end of the day,
[8:33] Speaker 3: it has led to this long lead time of getting
[8:36] Speaker 3: that mine operational.
[8:37] Speaker 1: It almost feels like we're in a moment of transition
[8:42] Speaker 1: in the copper world, because you know, if the good copper,
[8:45] Speaker 1: that low hanging fruit has mainly been plucked and you know,
[8:48] Speaker 1: we mentioned prices going up for copper, but the price
[8:50] Speaker 1: is currently on enough to really make doing bad copper well,
[8:54] Speaker 1: including you know, keeping local communities happy, complying with the
[8:58] Speaker 1: SG you know whatever waters by limitations that there's still
[9:02] Speaker 1: more upward pressure on prices to come because it's just
[9:04] Speaker 1: going to be more expensive to produce in the future.
[9:08] Speaker 2: Let's alone the scarcity exactly.
[9:11] Speaker 3: So on Bloomberg Terminal's or commodity price forecasts, we see
[9:15] Speaker 3: copper price forecasts going up to about twelve thousand and
[9:19] Speaker 3: some and the speculate highs about thirteen five hundred because
[9:24] Speaker 3: of this constraint, this structural constraint that's coming in terms
[9:28] Speaker 3: of a lack of supply coming online. High prices just
[9:31] Speaker 3: makes efficiency gains more accessible. For example, we had there's
[9:37] Speaker 3: a company called Jetty and then there's a company called
[9:40] Speaker 3: Rio Tinto. We're trying to leach waste heaps just to
[9:43] Speaker 3: get additional incremental supply online. But that, unfortunately is not
[9:48] Speaker 3: a silver bullet in terms of dealing with this deficit
[9:51] Speaker 3: in supply.
[9:52] Speaker 1: It's so interesting hearing all of this, and we're going
[9:54] Speaker 1: to get onto data centers in a moment. But this
[9:56] Speaker 1: framing is so interesting because I think that, you know,
[10:00] Speaker 1: as a child growing up, when people were first starting
[10:02] Speaker 1: to talk about climate change in school and you know,
[10:05] Speaker 1: the burning of fossil fuels, the other thing they would
[10:07] Speaker 1: say is, oh, and of course the fossil fuels are
[10:09] Speaker 1: going to run out eventually, you know, during your lifetime.
[10:12] Speaker 1: And you know, I'm forty four now and there's no
[10:15] Speaker 1: sign of the fossil fuels running out. But I always wondered,
[10:18] Speaker 1: you know, what does that look like? But it almost
[10:20] Speaker 1: seems like actually we're seeing what that looks like in
[10:23] Speaker 1: terms of copper, which maybe is just as essential a
[10:27] Speaker 1: material as to modern society as fossil fuels have been.
[10:31] Speaker 1: And it really seems like there's a reckoning going to happen, yeah,
[10:35] Speaker 1: because there's just simply not going to be enough, and
[10:38] Speaker 1: there's it sounds like there's no getting around that.
[10:41] Speaker 3: So right now, so if we look at what supply
[10:44] Speaker 3: looks like at this point in time, it comes from
[10:46] Speaker 3: a few sources, right so, mind or supply, it comes
[10:49] Speaker 3: from the circular economy in terms of scrap and then
[10:52] Speaker 3: obviously these incremental gains that we're trying to get by
[10:56] Speaker 3: making processing more efficient to extend mind lives. We go
[11:00] Speaker 3: back to fundamentals from a mind perspective. If we look
[11:03] Speaker 3: at the geology globally, there are sufficient reserves to close
[11:08] Speaker 3: this gap, but the issue is exploration. To ascertain which
[11:13] Speaker 3: reserves are great, which reserves or medium, and which reserves
[11:16] Speaker 3: are the bad coppers and more economically challenged takes time.
[11:20] Speaker 3: It takes a lot of KPEX, So exploration KPEX can
[11:23] Speaker 3: be about like sixty percent of a mind's budget in
[11:26] Speaker 3: some years, and that's a lot of money for minds
[11:29] Speaker 3: to invest in these The fact is, yes, it's a reckoning,
[11:33] Speaker 3: but a reckoning that can be solved if we become
[11:36] Speaker 3: more aggressive about exploration mining and also try and find
[11:40] Speaker 3: ways to work around externalities that are currently challenging getting
[11:44] Speaker 3: these minds from exploration to first poor and some of
[11:47] Speaker 3: these externalities outside of ESG can also be permitting from governments.
[11:52] Speaker 3: We need to have more seamless permitting for various licenses
[11:56] Speaker 3: for these minds to come in. Tract the fact that
[11:58] Speaker 3: copper minds from x operation to first port take about
[12:01] Speaker 3: seven to ten years. It's too long. We already seeing
[12:04] Speaker 3: today that there's a little bit of a rumble in
[12:07] Speaker 3: the jungle, already.
[12:08] Speaker 1: That's so interesting, and from what you're saying, it seems
[12:11] Speaker 1: like the real issue here is not the fundamental scarcity
[12:15] Speaker 1: of copper. It's that we've all collectively as a global
[12:19] Speaker 1: economy maybe caught off guard by the change of pace
[12:22] Speaker 1: in demand, you know, for the energy transition, and then
[12:25] Speaker 1: now data centers ramping it up even more. Whereas, like
[12:28] Speaker 1: you know, copper supply was just this kind of thing
[12:30] Speaker 1: maybe bumbling along at its own pace, and that was
[12:33] Speaker 1: fine for everyone. Suddenly this increase in urgency means that
[12:38] Speaker 1: these are issues like permitting delays.
[12:40] Speaker 2: And it's so funny.
[12:40] Speaker 1: I mean, when we're talking about building the grid or
[12:42] Speaker 1: building renewables, permitting.
[12:43] Speaker 2: Delays, it's the same thing. It just crops up everywhere.
[12:46] Speaker 1: When we talk about this is you know, the energy transition,
[12:49] Speaker 1: build out of data centers. It's all about something that
[12:52] Speaker 1: is changing rapidly at a large infrastructure scale, and we
[12:55] Speaker 1: don't we're not set up well to do that at
[12:57] Speaker 1: the moment because maybe for most of our lifetimes the
[12:59] Speaker 1: world has been in a state of kind of gradual transition.
[13:03] Speaker 2: Yeah, in relative terms.
[13:05] Speaker 3: I think with the advent of the energy transition particularly,
[13:08] Speaker 3: I think it caught people of god, a lot of people.
[13:11] Speaker 3: We were anticipating it to an extent, but when it happened,
[13:14] Speaker 3: it happened very quickly, and just that added demand is
[13:18] Speaker 3: what kind of shocked the initial supplied demand balance. Now
[13:22] Speaker 3: you have data centers wanting this material, and now the
[13:25] Speaker 3: US are thinking about, you know, military spending because it's
[13:28] Speaker 3: spent so much. Copper is like the second top two
[13:31] Speaker 3: material that it uses. So if you keep adding more
[13:34] Speaker 3: demand layers with the supply pipeline that is so weak
[13:39] Speaker 3: and fragile already, Yeah, it's definitely in a course some
[13:42] Speaker 3: form of reckoning or shock in the market at some point.
[13:46] Speaker 1: So let's get to talking about copper as it relates
[13:48] Speaker 1: to data centers, because that is the sort of, I suppose,
[13:51] Speaker 1: the thing that's the newest in this story of copper,
[13:55] Speaker 1: the unlikely hero that has sort of risen to the fore.
[13:58] Speaker 2: How integral is copper to the building of data centers.
[14:01] Speaker 3: It is quite essential. So you can find copper everywhere
[14:04] Speaker 3: from like your graphic processing units to your servers, to
[14:09] Speaker 3: your electrical systems. Within the data centers, you find them
[14:12] Speaker 3: in the cooling systems, find them in the lights, in
[14:14] Speaker 3: the ceiling, you find them in redundancy systems that a
[14:18] Speaker 3: lot of hyperscalers use to guarantee the uptime at the
[14:22] Speaker 3: end of the day.
[14:22] Speaker 2: So, just like.
[14:23] Speaker 3: Blood is important for the circular tree system of the body,
[14:26] Speaker 3: That's how I view copper. Copper carries like blood carries oxygen,
[14:30] Speaker 3: which is power and electricity to these integral components and infrastructure.
[14:35] Speaker 1: And so you know, there's a bit of a note
[14:37] Speaker 1: here about that. You know, we talk a lot about
[14:39] Speaker 1: the different types of data centers. I mean, do you
[14:42] Speaker 1: see that? Is it from a copper point of view?
[14:44] Speaker 1: All data centers are created the same and AI is
[14:47] Speaker 1: just more data centers. There is there anything specific about
[14:50] Speaker 1: some of these applications that impact the necessity around copper.
[14:54] Speaker 3: So not all data centers use copper in the same intensity,
[14:59] Speaker 3: if I can say, or at the same rate. So
[15:02] Speaker 3: if we look at AI in terms of training and inference,
[15:05] Speaker 3: and I guess the podcast you did with Natalie and
[15:08] Speaker 3: Helen gave us a great overview in terms of what
[15:10] Speaker 3: these two workload types are. So in terms of training
[15:14] Speaker 3: workloads themselves, they're very dense. And what I mean by
[15:17] Speaker 3: densities that they require a lot more copper but megawatts
[15:21] Speaker 3: than your inference data centers would, so that basically means
[15:26] Speaker 3: that you would require copper, more copper in your cooling,
[15:29] Speaker 3: in your electrical systems, in your GPUs graphical processing units
[15:34] Speaker 3: within a training data center. Inference, on the other hand,
[15:38] Speaker 3: is more decentralized, it's more widespread. It doesn't use the
[15:42] Speaker 3: type of GPUs or the number of GPUs that a
[15:45] Speaker 3: training center would use, so it's less specialized compared to
[15:48] Speaker 3: a training data center. Hence it uses less copper per
[15:52] Speaker 3: square meter. But because inference is so widespread because of
[15:57] Speaker 3: latency requirements, that all adds up right, So it's both
[16:01] Speaker 3: of them are quite important at the end of the day.
[16:03] Speaker 3: And on top of that, you have things like crypto
[16:06] Speaker 3: cloud based data centers that come into that mix to
[16:09] Speaker 3: actually build this copper demand over the next decade.
[16:13] Speaker 1: So, I mean, the question I have that I think
[16:16] Speaker 1: when I think about all of this is I remember
[16:18] Speaker 1: at school in science class when we were learning about
[16:22] Speaker 1: electricity and we were learning about conductors and resistance, and
[16:25] Speaker 1: the teacher was explaining, how, you know, all of our
[16:27] Speaker 1: wires are made from copper because it's got such low resistance,
[16:31] Speaker 1: And I remember saying, you know, one metal that is
[16:33] Speaker 1: even better at being copper than copper is silver, But
[16:37] Speaker 1: we would never do it because it's just so ridiculously expensive.
[16:39] Speaker 2: To have silver wires everywhere.
[16:41] Speaker 1: So my question is not like, are we going to
[16:42] Speaker 1: it's copper going to get so expensive that we're going
[16:44] Speaker 1: to start using silver in our data centers. It's more
[16:47] Speaker 1: what alternatives exist in all of these different applications, both
[16:51] Speaker 1: in data centers and outside of data centers.
[16:53] Speaker 2: I mean, I've listed one silver that doesn't seem.
[16:56] Speaker 1: Very realistic, but are there are there any sort of
[16:59] Speaker 1: realistical turn tips?
[17:00] Speaker 3: So they are definitely fiber optics and aluminum, as the
[17:05] Speaker 3: Americans say, are definite options for substituting copper and data centers.
[17:10] Speaker 3: The catch here is, though, that aluminum only has sixty
[17:13] Speaker 3: percent of the conductivity that copper has. And because these
[17:17] Speaker 3: data center operators have the cash flow, they have the kpex,
[17:21] Speaker 3: why would I substitute when I can afford copper. So
[17:24] Speaker 3: usually the rule of Thumb and industry is if the
[17:28] Speaker 3: copper price is three point eight times to four times
[17:31] Speaker 3: the price of aluminium, then we can consider substitution. But
[17:35] Speaker 3: because of things like the uptime requirements for these data centers,
[17:39] Speaker 3: you can't add any type of material that would risk that.
[17:42] Speaker 3: So when it comes to critical components in the data center,
[17:45] Speaker 3: like you're cooling your IT hardware, it's copper all the way.
[17:48] Speaker 3: When it comes to external things like security, parking within
[17:53] Speaker 3: and around the data center, non critical components, that's when
[17:57] Speaker 3: they could look at using aluminium. Optics in itself has
[18:01] Speaker 3: already been used for networking, so copper is only used
[18:04] Speaker 3: in like the first one hundred meter run, and then
[18:07] Speaker 3: the risk is fiber throughout the facility. So that's basically
[18:11] Speaker 3: the where you see substitution come in. But it's critical
[18:14] Speaker 3: to note that without copper in our critical components, you
[18:18] Speaker 3: can't maintain that ninety nine point nine nine nine time
[18:21] Speaker 3: at the end of the day.
[18:22] Speaker 2: Got it.
[18:23] Speaker 1: So what I'm hearing is there's a little bit of
[18:25] Speaker 1: substitution in the data center applications, but ultimately the companies
[18:29] Speaker 1: building data centers, they have the money to pay for
[18:32] Speaker 1: more expensive copper, so they're not going to be the
[18:34] Speaker 1: ones to either substitute it out completely or to not
[18:38] Speaker 1: build their thing, so they're going to be displacing someone
[18:43] Speaker 1: else's copper applications. So I suppose what is the maybe
[18:47] Speaker 1: the marginal application. Who loses out if data centers come
[18:50] Speaker 1: and hoover up a bunch of copper supply? What is
[18:53] Speaker 1: the thing that doesn't get built or becomes unviable or
[18:56] Speaker 1: has to substitute.
[18:57] Speaker 3: That's an interesting question because I guess when we looked
[19:01] Speaker 3: at those sectors before, like your traditional and energy transition sectors,
[19:05] Speaker 3: those are data centers competitors. Now, when it comes to
[19:08] Speaker 3: looking at the scale of kpex or just money that
[19:11] Speaker 3: data center builders and operators are throwing at this infrastructure,
[19:15] Speaker 3: the question really turns around to who has off take,
[19:19] Speaker 3: Who has long term supply chain security with these fabricators
[19:24] Speaker 3: that make these components, Who has those established relationships. So
[19:28] Speaker 3: I think the story should be not so much that
[19:30] Speaker 3: there's competition, but a bit of a refocus on who
[19:35] Speaker 3: is setting themselves up, given that we've given these indications
[19:39] Speaker 3: that this is coming. Who's setting themselves up for long
[19:41] Speaker 3: term success, Who's securing their supply chain to ensure that
[19:45] Speaker 3: they have a piece of the pie.
[19:47] Speaker 1: Kind of feels like the organizations that have kind of
[19:51] Speaker 1: done their homework and set it kind of reminds me
[19:53] Speaker 1: of you know, when you're at university and there's always
[19:56] Speaker 1: that person who books the one book out of the
[19:58] Speaker 1: library that everyone is going to need for this week's assignment.
[20:01] Speaker 1: This week's assignment is having copper, and someone has booked
[20:04] Speaker 1: that book out the library. We can't not talk about
[20:07] Speaker 1: the US in all of this because it's kind of
[20:09] Speaker 1: fifty percent of the world's data centers. Are there a
[20:11] Speaker 1: huge amount of the growth in data centers expected there.
[20:14] Speaker 1: And we mentioned earlier that the domestic supply of copper
[20:18] Speaker 1: in the US is not sufficient to meet US demands.
[20:21] Speaker 2: So what are they going to do?
[20:23] Speaker 3: In twenty twenty four, they consumed about one point six
[20:26] Speaker 3: million times right domestically, they produce about half of that
[20:30] Speaker 3: for their applications for their demand, and then they import
[20:34] Speaker 3: from China and the rest. So the narrative goes back
[20:37] Speaker 3: to how they strategize one, build more minds. But in
[20:41] Speaker 3: the US the minds are also a lot of great
[20:44] Speaker 3: quality two decision making around tariffs with specific countries, so
[20:48] Speaker 3: they have to be very strategic about what they tariff
[20:52] Speaker 3: and what they don't. For example, in China, there's a
[20:54] Speaker 3: stalemate in terms of tariffs that have been paused because
[20:58] Speaker 3: the US needs some of the refined material that only
[21:02] Speaker 3: China produces and hence they've kind of stopped that and
[21:04] Speaker 3: we're waiting for the end of this month to kind
[21:07] Speaker 3: of see what's going to happen, what conversation is going
[21:10] Speaker 3: to open from their other countries that they could form
[21:13] Speaker 3: better relationships with Peru, Chile and then the DRC. But
[21:18] Speaker 3: that in itself there's a lot it can do, but
[21:21] Speaker 3: it's also the way it does it in terms of
[21:23] Speaker 3: trade relations to secure their own domestic supply and hence
[21:27] Speaker 3: the buildout of these data centers.
[21:29] Speaker 1: So there's a little bit of nuanced strategy required with
[21:33] Speaker 1: certain key players. And yeah, we'll have to see whether
[21:37] Speaker 1: the US can dance that dance effectively, because you know,
[21:41] Speaker 1: I mean, I suppose in all of this as well,
[21:42] Speaker 1: we're saying copper it sounds like it's in the top
[21:45] Speaker 1: tier of strategic materials, but it's not the only thing
[21:48] Speaker 1: in the top tier, and it's probably I guess what
[21:51] Speaker 1: you're describing is not as simple as it sounds, you know,
[21:54] Speaker 1: just being friends with who you need to be friends with.
[21:57] Speaker 1: So given the high demand for copper and in certain countries,
[22:01] Speaker 1: including the US specifically, there's going to be a bit
[22:05] Speaker 1: of a gap. What kind of actions and changes to regulations.
[22:08] Speaker 1: Could you see them taking to address that?
[22:11] Speaker 3: So I think just harboring on the US narrative in
[22:15] Speaker 3: itself when we go back to you ESG issues. So
[22:20] Speaker 3: let's take out tariffs, let's take out their lack of supply.
[22:24] Speaker 3: I think one of the key issues that they might
[22:26] Speaker 3: be able to start off with one. They've now added
[22:29] Speaker 3: copper as a critical mineral or it's in proposal stage,
[22:33] Speaker 3: which is great.
[22:34] Speaker 1: I just clarify because when you say they've been classified
[22:38] Speaker 1: as a critical mineral is I always thought that when
[22:40] Speaker 1: we say something's a critical mineral, that was just like
[22:43] Speaker 1: it was no more than a label reflecting our opinion
[22:46] Speaker 1: that it is critical. And I think I might be
[22:48] Speaker 1: learning something new here is critical mineral and official designation
[22:52] Speaker 1: in the US.
[22:53] Speaker 3: Not just the US. It's a term that has slowly
[22:57] Speaker 3: been developed for US as an industry to understand that
[23:01] Speaker 3: criticality means something that a region or a country may
[23:06] Speaker 3: have lack of and need to focus resources on to
[23:10] Speaker 3: close that gap, to not be behind at the end
[23:13] Speaker 3: of the day, to rather build up surplus of it.
[23:16] Speaker 3: So as soon as you see critical criticality means there's
[23:19] Speaker 3: a little bit of trouble we need these minerals to
[23:22] Speaker 3: grow our economy, we need these minerals to grow out
[23:24] Speaker 3: our industry, and if we might not have enough of
[23:27] Speaker 3: those on those lists.
[23:29] Speaker 1: So the EU in questions around raw materials that EU
[23:33] Speaker 1: is typically not a supplier but a source of demand.
[23:37] Speaker 1: How do they play in this world where copper is
[23:40] Speaker 1: in short supply but is incredibly important for the future.
[23:43] Speaker 3: So the EU in itself has also come up with
[23:46] Speaker 3: its own critical mineral strategy, and one key point around
[23:50] Speaker 3: that is recycling or the circular economy. So they've put
[23:55] Speaker 3: a lot of effort in backing projects several projects that
[23:59] Speaker 3: now focus on recycling. They very consciously do follow like
[24:03] Speaker 3: fabricated scrap to ensure they understand where it's coming from,
[24:08] Speaker 3: where it's going within their region. They also focused on
[24:12] Speaker 3: limiting exports of scrap out so that they themselves can
[24:15] Speaker 3: use it, which helps with them maintaining their own inventories.
[24:19] Speaker 3: So while there are initiatives that the EU is taking
[24:23] Speaker 3: up because they are such a high demand center, they
[24:26] Speaker 3: still need to go to the countries that are actually
[24:29] Speaker 3: you know, supplying the actual or at the end of
[24:31] Speaker 3: the day, and they still need to be aware that
[24:34] Speaker 3: what they're doing is not a silver bullet for their
[24:36] Speaker 3: domestic demand. Exports or imports are quite critical for them
[24:40] Speaker 3: to maintain their copper suppliers. One interesting thing that I
[24:44] Speaker 3: found though, Tom is a bit of a project between
[24:46] Speaker 3: Glencore and Schneider Electric. Right, so glen Core minds copper,
[24:51] Speaker 3: Schneider Electric makes the components that goes into these data centers.
[24:55] Speaker 3: They have formed a partnership, so they've basically secured their
[24:59] Speaker 3: fe future copper supply. And we might see a lot
[25:02] Speaker 3: of the EU doing those partnerships to be able to
[25:05] Speaker 3: secure their own copper supply.
[25:07] Speaker 1: So basically the strategy for the EU is to sign
[25:10] Speaker 1: the book out the library before everyone else does.
[25:13] Speaker 2: Yes.
[25:13] Speaker 1: Finally, I mean when we ever were talking about something
[25:16] Speaker 1: being critical and in short supply, all of that nuance
[25:19] Speaker 1: can boil down into a number, which is the price.
[25:21] Speaker 1: And you mentioned that we've seen, you know, even in
[25:23] Speaker 1: the last month, the price of copper going up, indicating
[25:27] Speaker 1: a sort of a recognition that this is now becoming
[25:29] Speaker 1: a kind of a very very critical material.
[25:32] Speaker 2: What is the outlook?
[25:33] Speaker 1: Do you have a view on where the price of
[25:35] Speaker 1: copper is headed or does it do other people have
[25:37] Speaker 1: a view on that.
[25:38] Speaker 3: In being if we use the commodity price forecast consensus,
[25:42] Speaker 3: which is basically a tool on terminal where analyst comes
[25:45] Speaker 3: together and forecasts the mean, mid, and high copper prices.
[25:50] Speaker 3: And right now copper prices are quite elevated, close to
[25:54] Speaker 3: ten thousand dollars per ton, and we have analysts speculating
[25:58] Speaker 3: that by twenty twenty eight we could see highs about
[26:01] Speaker 3: thirteenery five hundred, which is quite substantial and it's quite
[26:06] Speaker 3: telling of what's happening within the market from a tight
[26:09] Speaker 3: supply point of view, and hopefully that will be a
[26:12] Speaker 3: wake up signal for these different sectors to see just
[26:16] Speaker 3: how material copper could be within their different infrastructural buildout. Now,
[26:21] Speaker 3: when you translate that to data centers, we did a
[26:23] Speaker 3: bit of study on data center builds that cost between
[26:27] Speaker 3: seventeen million and I think thirty six million per megawatt,
[26:31] Speaker 3: and what we found there is that copper can account
[26:34] Speaker 3: for about three to six percent of capital expenditure. While
[26:37] Speaker 3: that doesn't sound like a big number, and while we
[26:40] Speaker 3: know hyperscalers can afford this number, what we would like
[26:44] Speaker 3: to emphasize that this is a very important line item
[26:47] Speaker 3: on the materiality of copper and that that money still
[26:51] Speaker 3: can translate to something quite substantial that can be used
[26:54] Speaker 3: for something else. So it's just for us to encourage
[26:57] Speaker 3: these builders to just like watch the market and understand
[27:01] Speaker 3: how it impacts how you build out your infrastructure.
[27:03] Speaker 1: Yeah, and I think the other part of it as
[27:06] Speaker 1: well is that even if they can ultimately afford it
[27:09] Speaker 1: and decide it's worth it, someone somewhere is going to
[27:12] Speaker 1: feel the crunch on this. And yeah, it seems that
[27:15] Speaker 1: copper is critical to everything. I've learned so much today.
[27:18] Speaker 1: I did not know there was such a thing as
[27:20] Speaker 1: good copper and bad copper for a start, and that
[27:22] Speaker 1: was really interesting. And you know, maybe the future it
[27:25] Speaker 1: won't be good copper and bad copper will be good
[27:27] Speaker 1: copper and not quite as good copper.
[27:28] Speaker 2: If we figure out a.
[27:31] Speaker 1: Way to mitigate some of these environmental issues and of
[27:33] Speaker 1: the cost issues permitting, maybe that's the road to salvation
[27:38] Speaker 1: for us, is to figure out how to make bad
[27:40] Speaker 1: copper better. But it's been really fascinating, and I did
[27:43] Speaker 1: not have an appreciation going into this of quite how
[27:47] Speaker 1: critical copper is to just everything. So Rose, thank you
[27:50] Speaker 1: so much for joining today.
[27:52] Speaker 3: Thank you so much, Tom for having me today. I'm
[27:55] Speaker 3: happy to talk a lot more about this. It's just
[27:58] Speaker 3: one of those things we need to keep boff finger
[28:00] Speaker 3: on the doll on because the marketer is deffinitely becoming
[28:03] Speaker 3: quite exciting going forward.
[28:05] Speaker 1: Well, those of you listening who are BNF clients, you
[28:09] Speaker 1: literally can talk to Rose more about this. Get in
[28:12] Speaker 1: touch with your rep and they can set up a conversation.
[28:15] Speaker 3: Thanks Tom.
[28:24] Speaker 4: Today's episode of Switched On was produced by Cam Gray
[28:27] Speaker 4: with production assistants from Kamala Shelling. Bloomberg NIF is a
[28:31] Speaker 4: service provided by Bloomberg Finance LP and its affiliates. This
[28:34] Speaker 4: recording does not constitute, nor should it be construed as
[28:37] Speaker 4: investment in vice, investment recommendations, or a recommendation as to
[28:41] Speaker 4: an investment or other strategy. Bloomberg ANIF should not be
[28:44] Speaker 4: considered as information sufficient upon which to base an investment decision.
[28:48] Speaker 4: Neither Bloomberg Finance LP nor any of its affiliates makes
[28:51] Speaker 4: any representation or warranty as to the accuracy or completeness
[28:54] Speaker 4: of the information contained in this recording, and any liability
[28:58] Speaker 4: as a result of this recording is expressly it is quiet.
[29:09] Speaker 2: Hm

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