Copper Squeeze Hits AI & Bitcoin Power Needs

The global copper market is facing its most severe supply squeeze since 2021, significantly impacting industries reliant on substantial electrical infrastructure, such as Bitcoin mining and artificial intelligence. On Monday, the London Metal Exchange's cash copper contract traded at a premium of $478 per ton over the three-month contract. This wide backwardation indicates buyer urgency for immediate metal availability.

This situation follows a $370-per-ton front-month premium on Friday, as LME inventories have declined for 42 consecutive days, the longest such streak since 2014. With current stockpiles at 204,975 tons, nearly half is already earmarked for withdrawal. Copper prices have risen nearly 16% this year, approaching previous records.

The squeeze is attributed to both declining production and a redirection of metal due to potential U.S. tariffs. This has created an arbitrage opportunity, drawing copper away from LME warehouses and exacerbating shortages elsewhere, especially in Europe. Production figures for the second quarter showed a 3.9% year-over-year decrease.

Jefferies forecasts a growing copper deficit, projecting a 442,000-ton shortfall in 2026 and an 782,000-ton deficit by 2030. For Bitcoin miners, rising copper costs will directly increase capital expenditure for essential components like transformers, substations, and cabling, potentially squeezing profitability.