Commodities | 11:30 AM
US energy demand to resume growth; super-cycle in copper; investment in critical aluminium; downside risk for gold.
- US energy demand on the rise again
- All aboard the copper super cycle
- Critical aluminium
- When can gold resume its bull run?
By Greg Peel
Rising Energy Demand
US energy demand has been on a slight downward trend for the past two decades, Morgan Stanley notes.
After peaking in 2007, total US energy consumption has been slowly declining at an average rate of -0.0-0.5% per year. Technological advancements, efficiency improvements, and the de-industrialisation of economic growth have all pushed the energy intensity of US GDP lower, falling -36% over the period.
The mix of energy types has been changing, but slowly. Notably, says Morgan Stanley, the share of fossil fuels (coal, natural gas, and petroleum) has only declined -9% over the last 45 years, moving from 92% in 1980 to 83% in 2023. For just oil & gas (ex-coal), the share has actually held fairly steady for the last half century.
But Morgan Stanley points out US energy demand is set to resume growth in the decade ahead. Two emerging trends are set to push domestic energy needs higher, reversing decades of stagnation: reshoring of manufacturing, alongside rising electricity use from AI data centers and broader electrification.
Total domestic energy demand across all end-markets is forecast to rise by 10%, eclipsing the prior 2007 peak by 2030.
Renewables alone will struggle to keep pace with rising consumption, keeping the transition away from fossil fuels fairly slow. The energy intensity of GDP should continue to decline, but at a slower rate (-0.9% per annum in 2025-35 versus a -2.2% average over the past 20 years).
What Morgan Stanley does not address in this conclusion is Trump’s antipathy towards renewable energy, his cancelling of funding for projects previously approved by Congress, and his determination to dismantle Biden’s Inflation Reduction Act, which was largely focused on a renewable energy push.
Energy Requires Copper
Over the past year, leading US copper miner Freeport-MacMoRan halted operations at its large mine in Indonesia following an accident, and has subsequently been unable to meet contract obligations or its planned project ramp-up timeline.
Canadian miner Ivanhoe Mines halted production at its mine in the Congo due to flooding and a mine in Chile due to a tunnel collapse. These three mines produce around 7% of the world’s mined copper, Bell Potter notes, creating a short-term production headwind for the metal.
The US is viewing copper as strategic asset, with its supply critical to defence, electronics and autos. Hence, Trump decided in August to put a 50% tariff on copper imports, alongside steel and aluminium, until the price of US copper soared above the price of LME copper, creating a significant arbitrage. Then he TACO-ed.
Rising US copper inventories are currently suppressing the copper price, Bell Potter notes, effectively neutralising the impact of the significant supply shocks seen over the last 3-6 months. Looking ahead to 2026, the analysts anticipate a tighter global copper market.
Bell Potter expects the global copper market to tighten considerably as inventories fall and supply disruptions continue to persist. With demand simultaneously rising due to cyclical and structural factors. A tighter market is expected to manifest into a higher copper price.
Growing demand for copper rests on transition to a low-carbon world, in which demand for renewable energy continues to balloon. Bell Potter points to data collated by the International Energy Association, suggesting nearly 80m kilometres of power lines will need to be replaced by 2040 and power grid capex will need to double to US$600bn per annum by 2030 to support climate-related goals.
Estimated incremental copper demand is set to increase by circa 6 Mt/year to meet the IEA’s Stated Policy Scenario, designed to capture trends within the current policy landscape. The combination of new demand from growing industries including data centres, electric vehicles and emerging economies together with traditional supply channels is set to boost copper demand growth from a 2% compound annual growth rate over the last 15 years to a CAGR of 2.6% out to 2035.
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