Goldman Sachs(US:GS) Xin Hua Cai Jing·2025-12-30 13:42Core Viewpoint - Copper prices have surged to historical highs due to supply constraints and increasing demand from emerging sectors like AI and renewable energy, while concerns about potential tariffs and inventory levels in the U.S. add complexity to the market dynamics [1][2][10]. Supply Dynamics - On December 3, 2023, copper prices reached $11,448.50 per ton, marking a new high since May 2021, driven by supply tightness exacerbated by the cancellation of warehouse receipts by major commodity traders like Mercuria [1]. - The global copper supply has been disrupted, with mining pressures affecting smelting operations, leading to a forecasted reduction in copper production capacity by over 10% for 2026 [1][2]. - U.S. copper inventories account for nearly 50% of global stocks, while the remaining regions hold less than half, indicating a potential depletion of copper outside the U.S. [2]. Demand Drivers - Structural growth in demand for copper is being fueled by sectors such as electric vehicles, renewable energy, and AI, with significant investments in AI infrastructure expected to drive copper consumption [2][4]. - The AI sector alone is projected to increase copper demand by 47,500 tons by 2026, significantly impacting the supply-demand balance in a market that typically has a shortfall of only 10-20 thousand tons annually [4]. Market Sentiment and Price Projections - Despite recent price fluctuations, the market remains optimistic about copper's long-term prospects, with forecasts suggesting prices could stabilize around $11,400 per ton in 2026 [5][12]. - Analysts warn that U.S. inventory levels may create a "dam" effect, potentially flooding the market if tariffs are lifted or delayed, which could lead to significant price volatility [10][11]. Infrastructure and Regulatory Challenges - The construction of AI data centers is facing delays due to bottlenecks in electrical grid access and supply chain issues for critical power equipment, which may slow down the anticipated demand growth for copper [6][7]. - In Europe, regulatory measures are being implemented to limit the expansion of data centers, further complicating the supply landscape for copper [8][9]. Alternative Materials and Recycling - High copper prices may accelerate the adoption of aluminum as a substitute, particularly in non-AI sectors, while advancements in recycling technology could increase the supply of recycled copper [12].