Copper’s new fundamental: How fear is shaping the market

The copper market is no longer a simple story of supply and demand. It has become a complex arena where fear, geopolitics and future expectations dictate price and availability. This shift was the central theme of the latest Fast Forward podcast episode, where host Andrea Hotter spoke with David Lilley, founder of Drakewood Capital Management, about the evolving dynamics of this critical mineral.

For years, market analysts have relied on traditional fundamentals to understand copper’s trajectory. But, as Lilley explained, a new and powerful force is at play.

• Fear as a market fundamental: “Fear has actually become a fundamental in itself,” Lilley stated
• Sentiment and scarcity: Investor sentiment and anxieties about potential resource scarcity now hold as much weight as physical stockpiles
• Price influencers: As a result, prices are often set by investment flows reacting to possible disruptions, rather than current consumption levels

Deglobalization and the scramble for supply

The trend of deglobalization is amplifying this market anxiety. As nations prioritize economic and supply chain resilience, the seamless flow of materials across borders is no longer guaranteed. The conversation highlighted the increasing use of tariffs and trade barriers, which create uncertainty and force companies to rethink their sourcing strategies.

This environment has spurred a renewed focus on strategic stockpiling:

• National strategies: Countries are working to secure access to critical minerals like copper to protect domestic industries from geopolitical shocks
• Project Vault example: Lilley pointed to an intriguing development in the US, which has managed to build a strategic copper stockpile without direct government spending. This initiative, known as Project Vault, reflects the growing urgency among Western nations to de-risk their supply chains and reduce reliance on single sources
• Corporate adaptation: Companies are also being forced to carry more inventory, moving from a “just-in-time” to a “just-in-case” model to ensure operational continuity

Raw materials as the new bottleneck

The discussion also offered a contrarian view on the future of global industry. While much of the focus is on the transformative power of AI and robotics, Lilley argued that the true constraint will not be technological capability but the availability of raw materials.

As AI and automation drive unprecedented demand for electrification and advanced infrastructure, the need for copper and other critical minrals will skyrocket. Lilley predicted, “the AI revolution will shift constraints from labour and ingenuitity to raw materials.”

This perspective reframes the global economic challenge and highlights the factors that will define national success in the coming decades:

• Soaring demand: AI and robotics will rapidly increase the need for copper and other critical minerals
• Raw material constraints: Access to essential resources will become more important than technological breakthroughs
• Strategic advantages: Securing supplies of key minerals will shape national competitiveness and resilience
• Prolonged market strength: These pressures could result in an extended period – potentially over a decade – of strong performance for the copper market

The rise of the circular economy

While the supply landscape faces challenges, innovative solutions are emerging. The episode explored the significant opportunity presented by the circular economy, particularly in the recycling of electronic waste (e-waste). As millions of electronic devices are discarded each year, they create a vast, urban mine of valuable materials, including copper.

Recovering these metals from e-waste not only provides an alternative source of supply but also addresses a pressing environmental issue. The circular approach offers several advantages:

• Diversified supply chains: E-waste recycling introduces new sources for critical materials like copper
• Reduced need for new mining projects: Reusing metals decreases the pressure to develop new, resource-intensive mining operations
• Sustainability: Circular models promote responsible resource consumption and minimize environmental impact
• Innovation in metal recovery: Ongoing technological improvements are making it easier and more cost-effective to extract valuable elements from discarded electronics

As technology for metal recovery advances, e-waste recycling is poised to become an increasingly vital component of the global copper supply.

In this new era of uncertainty, understanding the interplay between fear, geopolitics and technological advancement is essential. The copper market serves as a clear indicator of broader global shifts, where strategic foresight and supply chain resilience are the keys to navigating the choas.