The world needs more copper than it can produce

Copper has reached record highs in 2026 despite a year marked by geopolitical uncertainty, trade tensions and heightened market volatility. While these events have influenced short-term price movements, they are arguably distracting from the bigger story.

Decarbonisation, and copper’s critical role in enabling it, has been one of the Victor Smorgon Partners Global Multi-Strategy Fund’s long-term investment themes for several years. Our investment approach looks for structural trends that can play out over many years, and we believe copper remains one of the clearest examples of a market where long-term demand is running ahead of the industry’s ability to respond with new supply.

The demand story is well understood. While AI data centres have recently attracted attention, they are part of a much broader shift towards electrification. Renewable energy projects, electric vehicles, grid upgrades and data centres all require more electricity – and more electricity requires more copper. Governments are also treating copper as a strategic material, investing heavily in power infrastructure while seeking to strengthen supply chains and diversify away from China, who controls ~40% of global refining capacity. These are long-term trends that are unlikely to reverse any time soon. 

The more interesting question is the supply side.

While higher commodity prices would normally encourage new production, copper is becoming increasingly difficult to produce. Major discoveries are becoming fewer and generally smaller, existing mines are experiencing declining ore grades, and it now takes close to two decades, on average, to bring a new project into production. Mining giant BHP, for example, is investing heavily at Escondida in Chile, the world’s largest copper mine, simply to maintain production as ore grades decline.

Recent operational disruptions at several major mines, together with Chilean producer Codelco’s decision to prioritise profitability over production growth, reinforce how difficult it has become to deliver meaningful new supply. Faced with these constraints, the industry is increasingly favouring expansions of existing operations, known as brownfield developments, rather than developing entirely new mines. This reflects the rising cost, complexity and time required to bring new copper projects into production.

For us, the key question is no longer whether demand for copper will remain strong. It is whether the mining industry can produce enough new supply to meet it.

That is why copper and decarbonisation remain a core long-term investment theme for us. While short-term price movements will continue to be volatile, our outlook is shaped by the mining industry’s ability to deliver enough new supply to meet growing demand. For now, we see little evidence that the supply constraints underpinning our view are easing.

Written by: Ben Salter - Portfolio Manager at Victor Smorgon Group, with a focus on global resources and long-term investment themes including copper and decarbonisation.