The copper price faces short-term headwinds from trade wars and weakening United States consumption, but longer-term demand from artificial intelligence and grid electrification is set to overwhelm supply, Red Cloud Securities says in a new report.
The Toronto-based firm forecasts a copper surplus of 126,000 tonnes in 2026 as tariffs weigh on growth and US demand shrinks by 6%, according to the analysis issued on Wednesday. Average effective US tariffs have reached 18%, the highest since 1934, cutting household purchasing power and adding to recession risks, Red Cloud commodity strategist Kenneth Hoffman says. The firm already expects a 2% decline in US demand this year.
“Copper will face a highly volatile 2026 due to dollar woes, tariff tantrums, weak economies and massive AI grid investments,” Hoffman says in the report. “Copper is poised at the centre of a tug‑of‑war between near‑term macro‑economic headwinds and long‑term electrification and AI tailwinds.”
While tariffs and weaker US demand could bring a brief surplus and softer copper prices in 2026, the metal’s long-term outlook remains bullish, Red Cloud argues. AI data centres, energy storage and transmission upgrades add a powerful new layer of demand to electrification trends. They will create supply deficits that established and emerging producers will struggle to fill.
Copper price forecast
Red Cloud cut its 2026 copper price forecast to $3.65 per lb. from $3.85, reflecting the anticipated surplus. Longer term, it raised its 2028 forecast to $5.25 per lb. from $5 and sees copper averaging $6 per lb. by 2030 as demand from AI and electrification intensifies. The analysis assumes all-in sustaining costs for major producers will rise to $2.60 per lb. by 2028 on inflation and capital intensity.
Copper was trading at $4.62 a lb. on Wednesday morning.
From 2027, copper supply deficits will return as power-hungry AI data centres drive expansion of battery energy storage systems (BESS) and transmission lines. Red Cloud forecasts deficits of 19,000 tonnes in 2027, 46,000 tonnes in 2028, widening to 555,000 tonnes in 2029 and 766,000 tonnes by 2030.
Developers such as Hudbay Minerals (TSX: HBM; NYSE: HBM), Capstone Copper (TSX: CS), and Lundin Mining (TSX: LUN) are positioned to benefit from the predicted shortages.
Hudbay is advancing the fully permitted Copper World project in Arizona , and has expanded reserves at its Constancia mine in Peru. Capstone is ramping up output at its primary Pinto Valley operation in Arizona and the Cozamin mine in Mexico, while pursuing expansions at Mantoverde and Santo Domingo in Chile. Lundin Mining is integrating its Candelaria mine in Chile and Eagle in Michigan with development of the Josemaria project in Argentina, positioning it to grow copper production this decade.
However, permitting delays and weak supply growth mean producers are unlikely to keep up. The US averages 29 years to permit and build a copper mine, while domestic setbacks for Chilean state miner Codelco and the closure of First Quantum’s (TSX: FM) Cobre Panamá mine highlight supply risks, Red Cloud noted. Also, BHP (NYSE, LSE, ASX: BHP) and Freeport-McMoRan (NYSE: FCX) face rising capital spending.
Data centres
Red Cloud estimates data centres could consume as much as 10% of North American electricity within five years, with individual hyperscale facilities requiring up to 50,000 tonnes of copper for wiring, grounding, and cooling. China is already adding storage capacity at a record pace, and Spain’s April blackout underscored the strain of AI-driven demand on grids. Spain has the most server farms in the European Union.
Data firms are spending an estimated $200 billion this year on server farms, and consulting firm McKinsey predicts this amount could hit trillions of dollars by the 2030s, Red Cloud notes. BESS are rivalling electric vehicle batteries and accounted for 83% of China’s growth in lithium iron phosphate battery production this year.
The demand for backup power is rising sharply as server farms strain grids, and that means more copper. BESS production equalled 40% of electric vehicle battery demand last year, up from 8% in 2020, and could surpass 60% this year. By 2035, production of BESS and EV batteries may be on par, Red Cloud said.
“Copper’s exceptional electrical and thermal conductivity make it indispensable to power generation, transmission and digital infrastructure,” Hoffman said. “Transmission lines, transformers, motors, and renewable‑energy technologies rely on copper wiring and components. The transition to low‑carbon electricity and the explosive growth of AI data centers intensify this dependence.”
