The race to electrify everything from cars to data centers is colliding with the physical limits of the copper industry. A new S&P Global analysis warns that without a dramatic shift in investment and policy, the world could be short as much as 10 million tons of copper a year by 2040, creating what the authors describe as “systemic risks” for the global economy. That gap would not just be a headache for miners and metal traders, it would threaten the energy transition, the artificial intelligence boom, and even national defense planning.
At the heart of the warning is a simple mismatch: demand is set to surge while supply growth looks constrained and slow. I see that tension running through everything from electric vehicle targets to the buildout of hyperscale cloud campuses, and it is why copper, a metal that rarely grabs headlines, is suddenly a strategic vulnerability.
The scale of the looming copper gap
The new study from S&P Global sketches a world where copper demand races ahead of anything the industry has delivered before. The researchers project that the “accelerating pace of electrification” will push annual copper consumption to 42 million metric tons by 2040, a sharp jump from today’s levels. Yet even under optimistic assumptions for new mines and recycling, the industry is not on track to keep pace, leaving what the report describes as a “substantial shortfall” that widens over time. That is the context for the headline figure: a potential deficit of up to 10 million tons a year if current trajectories hold.
Market intelligence experts at S&P Global, cited by one mining company, frame this as a structural gap rather than a short-lived squeeze. Their analysis points to a possible shortfall of 10 MMT by 2040, even after accounting for projects in the pipeline. Another summary of the same research notes that S&P Global warns the copper deficit could hit 10 million tons by 2040 as the energy transition drives demand, sparking what it calls systemic risks to growth and financial stability. For policymakers who have treated copper as a background commodity, that language is a red flag.
Why demand is exploding: AI, defense and electrification
What makes this copper story different from past cycles is the breadth of demand drivers converging at once. The S&P Global study highlights the energy transition, from solar farms to heat pumps, as the core engine of growth, but it also flags a rapid buildout of artificial intelligence infrastructure and rising military budgets as new layers of pressure. One summary notes that AI and defense are set to drive global copper demand up 50% by 2040, threatening a 10M ton annual shortfall if supply does not respond. That is on top of the baseline needs of electric vehicles, grid upgrades and renewable power.
Within that mix, the AI boom is emerging as a surprisingly copper-intensive force. One analysis of the S&P Global work notes that demand from AI, data centers and global defense spending could roughly triple by 2040, adding about 4 million tons of consumption on its own, a surge that would deepen the world copper squeeze. Another summary points out that demand from just two categories, AI and defense, will exceed copper supply by more than 7 million metric tons in 2040, underscoring how concentrated some of the pressure is on the system, according to the Demand projections. The same research even identifies a potential fifth vector of demand, humanoid robots, noting that while the technology is still in its early stages, it could become a meaningful copper sink as production scales, according to a While the detailed report.
Supply is struggling to keep up
On the supply side, the numbers are sobering. Copper mines currently produce around 23 million tonnes of copper a year and are expected to peak at around 27 million tonnes in the early 2030s, according to an energy analyst who warns that this looming copper shortfall will constrict growth. That trajectory falls well short of the 42 million metric tons of demand S&P Global expects by 2040, even before factoring in potential disruptions from politics, weather or labor disputes. The gap is not just about volume, it is about timing, because new mines can take more than a decade to move from discovery to production.
Several analyses of the S&P Global work emphasize that copper mining faces declining ore grades, rising extraction costs and long development timelines for new projects, all of which make it harder to ramp up output quickly. One report notes that these structural headwinds mean there is no major shortage expected until 2029, but after that the market tightens sharply as demand keeps rising, according to a review of Copper supply risks. Another summary underscores that without improvement in above ground stocks, recycling and permitting, the system will remain vulnerable to supply shocks, a point captured in a Threat level assessment that also points to shifting regulations and tariffs as additional constraints.
From market squeeze to systemic risk
What turns a commodity shortage into a systemic risk is the way it ripples through other sectors, and copper is deeply embedded in the modern economy. S&P Global’s study, summarized in several briefings, argues that a persistent 10 million ton deficit would raise costs for everything from rooftop solar to 2026 model year electric SUVs, slow the rollout of charging networks and grid upgrades, and potentially derail national decarbonization targets. One overview notes that the research explicitly warns of By Namrata Sen highlighting how the energy transition itself could be undermined if copper remains scarce and expensive. That is not just an environmental issue, it is a macroeconomic one, because electrification is increasingly the backbone of industrial policy in the United States, Europe and Asia.
The financial system is not immune either. One summary of the S&P Global warning, written as a LendingTree-linked market note, points out that a chronic copper deficit could fuel inflation in clean energy technologies, complicate central banks’ efforts to manage prices and increase volatility in related equities and exchange-traded funds. Investors already have vehicles like COPX, the Global X Copper Miners ETF, and CPER, the United States Copper Index Fund, that are tightly linked to copper’s fortunes, and the S&P Global study suggests those exposures could become more volatile as the market tightens, according to a detailed breakdown that references Global research. For governments, the risk is that copper scarcity becomes a chokepoint for both climate goals and digital infrastructure, forcing hard choices about which projects move forward.
What could ease the crunch
There is nothing inevitable about a 10 million ton shortfall, but avoiding it will require a coordinated push on several fronts. The S&P Global study and its summaries repeatedly stress the need for more investment in mining and recycling, along with faster permitting and clearer regulatory frameworks. One overview notes that without improvement in above ground stocks and secondary supply, the system will stay fragile, a warning embedded in the Threat level discussion. Recycling is particularly important because it can bring material back into the system faster than a new mine can be built, and it is less exposed to geopolitical risk.
On the demand side, there is also scope to use copper more efficiently and to substitute other materials where possible, though the physics of electricity mean alternatives are limited. Some analysts point out that global demand for copper is expected to rise by 50% by 2040, driven by growth in the artificial intelligence sector and the broader electrification of transport and industry, which leaves little room for complacency. Another summary of the S&P Global work notes that AI and defense are set to drive global copper demand up 50% by 2040, threatening a 10M-ton annual shortfall unless the world’s capacity to produce it expands significantly, according to a Jan briefing. For now, the message from S&P Global is clear: without a step change in how quickly new copper supply comes online and how intelligently existing stocks are managed, the metal that powers AI, electric vehicles and modern defense systems could become a binding constraint on the next phase of global growth.
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Grant Mercer covers market dynamics, business trends, and the economic forces driving growth across industries. His analysis connects macro movements with real-world implications for investors, entrepreneurs, and professionals. Through his work at The Daily Overview, Grant helps readers understand how markets function and where opportunities may emerge.
