Aluminum and copper prices are skyrocketing due to a surge in demand driven by the growth of artificial intelligence (AI). The recent easing of the U.S.-China conflict has further contributed to this trend.
The London Metal Exchange (LME) reported that copper prices recently broke the $11,000 per ton mark, both in futures and spot trading, hitting record highs. This price surge is due to a combination of a structural supply deficit and growing demand from sectors like AI servers and power grid expansions.
As copper prices continue to climb, aluminum, often seen as a substitute, is also seeing a rise. The price of spot and futures aluminum has reached almost $2,900 per ton, the highest in over three years. While aluminum does not have the same electrical and thermal conductivity as copper, it can replace copper at a 2.5:1 ratio, driving its increasing value.
Consumers in industries like home appliances and electronics, which do not require high-purity copper, are beginning to shift toward aluminum when copper hits $9,000 to $10,000 per ton. This trend highlights aluminum’s growing role as an alternative material in various sectors.
Aluminum is one of the largest nonferrous metals globally, with annual consumption reaching approximately $300 billion. It is used in a wide array of industries, from aerospace to automobiles and electronics.
However, aluminum production is expected to face a cap starting this year. China, which produces 60% of the world’s aluminum, has implemented a cap on its annual smelting limit, set at 45 million tons. This move, coupled with the strong demand for aluminum as a substitute for copper, will likely keep prices rising in the near future.
Disruptions in supply chains for copper, along with its growing role as a substitute for copper, also play a crucial role in price hikes. The combination of factors points to a continued upward trajectory for prices in the industrial metal sector.
Daishin Securities forecasts that the rate of aluminum price increases will outpace copper, given the widening price gap. Bloomberg reports that some market analysts predict aluminum could rise to $4,000 per ton within the next two to three years, due to the structural supply shortage.
