KWM INSIGHT SERIES – CRITICAL MINERALS
Artificial intelligence, in particular generative AI, is rapidly reshaping our global critical minerals landscape. It has been projected that the generative AI market will grow by a multiple of 3X to USD1.3 trillion within the next decade, with AI infrastructure (including servers and storage) being the near-term segments for investment.[1]
The building of extensive and increasingly energy-intensive data centres to train and develop AI systems, as well as the manufacturing of semiconductor chips necessary for AI technology, are not possible without critical minerals. Copper, in particular, will play a crucial role in meeting the continuing surge in demand for AI technology and data centre construction (and the related incremental power demand), in addition to its important role in supporting the transition to net zero.
In this insight, we consider the current place of copper on Australia’s national Strategic Materials List (and not its Critical Minerals List), given its importance to the global AI revolution, and in comparison to its recognition as a critical mineral in other jurisdictions.
The role of copper in artificial intelligence
Copper has the highest electrical conductivity of all non-precious metals (copper is second only to silver overall), and is essential for the continued development and functioning of AI and data centres, and the electricity grids which support them.
Copper is particularly crucial to:
- the production of semiconductor chips necessary for AI technology (while chips themselves are largely comprised of silicon, copper is a key metal for interconnects in their integrated circuitry);
- many components of data centres, such as power cables, busbars, electrical connectors, and heat exchangers; and
- the power inputs to data centres.
It is well-recognised that AI (and, specifically, AI data centres) requires a multiple of the power consumed by data centres historically. The International Energy Agency (IEA) notes that “[a]fter globally consuming an estimated 460 terawatt-hours (TWh) in 2022, data centres’ total electricity consumption could reach more than 1 000 TWh in 2026”, which is roughly equivalent to Japan’s total electricity consumption.[2] Currently it is estimated that around 5% of available Australian electricity is directed to data centres, and may grow to 8% by 2030.[3]
Of course, this demand comes on top of that from areas such as the growth of electric vehicles and a broader push for electrification. Rightly, there is an intense focus on where and how that incremental power can be sourced in a sustainable manner. Renewable power generation facilities require about 5 times the amount of copper used for conventional power generation.[4]
Copper not a “critical mineral”
Notwithstanding its clear importance to AI and the increasing global shift to electrification, copper is not currently considered “critical” in Australia.
As noted in our previous insight, critical minerals are considered by the Australian Federal Government as metallic or non-metallic materials that are essential for modern technologies, economies or national security, and have supply chains that are vulnerable to disruption.[5]
In December 2023, Australia updated its list of Critical Minerals and placed copper on a new list of ‘Strategic Materials’.[6] Including copper as a Strategic Material indicates that although the Federal Government considers copper to be important for the global energy transition to net zero, its supply chain is not currently vulnerable enough to meet the criteria for the Critical Minerals List.
These lists are fluid, and Strategic Materials are being monitored for any market developments that may threaten their supply chains.[7] Any threat to the copper supply chain may result in it being elevated to a Critical Mineral, as nickel was in February 2024.[8]
The copper supply chain
Many key players in the energy sector believe that current supply and mining production is ill-equipped to meet the impending surge in demand for copper. According to the IEA:
- annual copper demand for electricity grids will double by 2040;
- total global demand for copper is set to reach 31,128 kilotonnes in 2030 and 36,379 kilotonnes in 2040 (up from 25,855 kilotonnes in 2023); and
- global supply of copper is expected to face a supply gap of nearly 10 million metric tonnes within the next ten years.[9]
Copper consumption for data centres has been forecast to jump from 197,000 tonnes in 2020 to 238,000 tonnes in 2030, and increase by approximately 50% in 2040 from 2020 levels.[10]
Global Critical Minerals definitions
Copper is considered critical in many jurisdictions, including Canada, the United States, India and South Korea. Evidently, individual countries develop their own lists of critical minerals based on the relative importance of particular minerals to their industrial needs and their strategic assessment of supply risks. Assessments of mineral criticality reflect market and political conditions at a particular point in time and are subject to change.[11]
By way of illustration, the diagram below depicts the commonalities and differences between Australia, Canada, the United States and the United Kingdom’s respective Critical Minerals Lists. The table that follows provides a summary of the different definitions of critical minerals in key jurisdictions.
Diagram: Comparison of Critical Minerals Lists
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Different definitions of critical minerals in key jurisdictions
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Applicable definition of Critical Minerals
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INDIVIDUAL
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Example
uses 2
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Australia (31 minerals)
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The Australian Government defines a critical mineral as a metallic or non-metallic element that has two characteristics:
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Canada (31 minerals)
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To be deemed critical in Canada, a mineral must be:
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United States (50 minerals)
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The United States defines a critical mineral as any non-fuel mineral, element, substance, or material that the Secretary of Energy determines:
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European Union (34 minerals)
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The European Union defines 'critical raw materials' as raw materials:
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United Kingdom (18 minerals)
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The United Kingdom's British Geological Survey and Department for Business, Energy and Industrial Strategy identifies critical minerals according to economic vulnerability and supply risk. The list is separated into minerals with high criticality and a watchlist of minerals not yet critical but increasing in criticality.[16] |
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Japan (32 minerals)
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Japan's critical minerals list is administered by the Ministry of Economy, Trade and Industry.[17] |
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India (30 minerals)
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India defines critical minerals as minerals that are essential for economic development and national security, noting in its Critical Minerals Strategy that 'the lack of availability of these minerals or concentration of extraction or processing in a few geographical locations may lead to supply chain vulnerabilities and even disruption of supplies.'[18] |
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South Korea (33 minerals)
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The Korean Ministry of Trade, Industry and Energy defines 33 elements as critical minerals. The definition reflects:
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Copper in Australia
Australia is reported to be home to the second largest collection of total copper reserves in the world, behind only Chile.[20] This includes globally significant projects such as the Olympic Dam deposit in South Australia and Queensland’s Mt Isa deposit.[21] If properly supported, Australia’s natural resources put it in pole position to capitalise on the growth of the copper industry.
In August 2023, the South Australian Government took the first step in recognising this opportunity and declared copper to be a critical mineral for South Australia and committed over $2 million funding to a new Copper Taskforce.[22] The SA Government also advocates strongly for the inclusion of copper on the national Critical Minerals List:
“An official Commonwealth listing would be a powerful acknowledgement of the importance of copper to global market’s providing further opportunities for investment and helping drive the exploration and development activity needed to ensure our state benefits from the opportunity to supply copper to the world.”[23]
What happens next?
The IEA in its 2024 “Global Critical Minerals Outlook” considers copper as a “key energy transition mineral” together with typical critical minerals including lithium, nickel, cobalt, graphite and rare earth minerals. Importantly the IEA’s assessment of the geopolitical and supply risk for copper is lower than those other key identified critical minerals.[24] If this were to change, then it may prompt a reassessment of copper’s designation, or not, as a critical mineral.
It seems clear that copper will play a crucial role if the surge in demand for AI technology and data centre construction is to be met. Clearly too, copper is indeed a ‘critical’ enabler of the broader energy transition. If copper were to be included in Australia’s Critical Minerals List, Australia’s copper industry would benefit from the various funding initiatives provided by the Federal Government to the critical minerals sector (as discussed in our recent article). This would ensure that Australia maximises this opportunity and remains a globally significant player in a rapidly-growing industry.
Given Australia’s copper reserves, its 2030 and 2050 domestic carbon targets, and its ambitions to preserve and grow its long-held position as a leading exporter of energy and metals, there may be impetus for the Federal Government to reconsider, and elevate, the categorisation of copper to the Critical Minerals List, and to follow the lead of South Australia and implement copper-specific initiatives.
