AI and rare earths shape global markets - TDS

Global markets are largely a function of two themes this year: the US Dollar (USD) debasement trade, and the world's progress towards a war-time economy, TDS' Senior Commodity Strategist Daniel Ghali notes.

Copper tightness driven by structural undersupply

"The latter theme has potentially been catalyzed by the rise of AI, given its immense geomacro implications, tying its progress towards rare earths and bringing the West's reliance on Chinese supply chains for a wider range of critical minerals into the fore."

"The structural undersupply in copper mining can now potentially result in smelter curtailments, feeding competition to secure the critical metal. This competition has resulted in a virtuous microstructure, such that the US continues to absorb available copper, diverting metal away from global inventory pools, keeping LME tight."

"The existing boom in data center capacity will notably raise copper demand, resulting in an estimated 500kt additional copper needed by 2027, but a potential boom in Chinese data center capacity given the emphasis from the Five-Year plan could result in substantially higher estimates."