AI, clean energy may trigger new commodity supercycle: Centrum report

A Centrum report indicates a new commodity supercycle is likely, driven by AI, clean energy, and reshoring. The upcycle has room to run, with copper facing a significant supply gap amid rising demand, especially from AI-driven data centres.

New Commodity Supercycle on the Horizon?

Investments in artificial intelligence (AI) infrastructure, the global clean energy transition and supply-chain reshoring could trigger a new commodity supercycle, creating long-term opportunities in copper, power infrastructure and electrification-related sectors, according to a Centrum report.

The report said the world may be in the early phase of a commodity supercycle -- a prolonged period of rising commodity prices -- with the current upcycle still having significant room to run. A supercycle happens when a huge, lasting jump in demand meets a supply base that takes years to grow. Looking at over a century of inflation-adjusted commodity prices, the last major low came in 2020, it noted.

Historical Context and Future Projections

Further, the current upcycle is around six years old and, based on past cycles that typically lasted 13-21 years, it may still have further room to run as prices remain below their long-term average. "Dating 113 years of inflation-adjusted prices puts the last low in 2020; we are about six years into an upswing that has historically run 13-21 years, with prices still slightly below their long-run average, room to rise, not a peak to fear," it said.

Key Drivers: AI Demand and Copper Supply Constraints

Further, short-term volatility in gold and oil has faded, while structural strength is emerging in copper due to supply constraints which is also reflected in Indian equities. Three demand engines are pulling at once while supply struggles to respond. AI-driven computing is becoming a major driver of global power demand.

Data centres consumed around 485 TWh of electricity in 2025, and this is expected to nearly double to about 950 TWh by 2030, accounting for nearly 3 per cent of global electricity use.

Growing Supply-Demand Gap

Furthermore, copper supply is facing growing constraints, with new mines taking around 17-18 years from discovery to production and ore grades declining significantly over time. A slowdown in major discoveries has further tightened the supply pipeline, with the IEA projecting a potential 30 per cent copper supply gap by 2035 and S&P expecting a significant shortfall by 2040, the report said.

Policy-Backed Supercycle

Additionally, the supercycle becomes policy-backed rather than a passing spike as "the metals are mined in a handful of countries, and one country, China, dominates the refining of almost all of them," it said.

Overall, AI-driven power demand is boosting copper consumption, but slow mine development is creating a supply gap, supporting expectations of a long-term commodity upcycle, the report noted. (ANI)

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