Copper’s Potential Power Surge: Energy, AI and Beyond

Please Note: President Trump announced a 50% tariff on copper imports on July 9, 2025. The copper tariff is set to take effect on August 1, 2025. This video was filmed before this announcement. 

In this episode of Metals in Motion, Steven Schoffstall, Director, ETF Product Management at Sprott Asset Management, discusses copper’s importance to energy and technology, and the associated structural supply deficit resulting from growing demand. Schoffstall also explores the potential rollback of clean energy subsidies, the challenges facing miners, and why copper and its miners may be attractive investment opportunities.

Video Transcript

Thalia Hayden: I'm Thalia Hayden with ETFguide. It's so nice to see you again. In these turbulent times, one thing remains constant: the importance of electricity and the need for more copper. Steve Schoffstall, Director of ETF Product Management at Sprott Asset Management, is helping us understand this renewed interest in copper. Steve, welcome to the program. It's great to see you again.

Steve Schoffstall: It's great to be back. Thanks for having me.

Thalia Hayden: Let's get started. For those in our audience who are new to copper, what's so important about it?

Steve Schoffstall: Copper is the third-largest metal based on how much is mined. The value was about $250 billion or so last year. It comes only behind iron ore and gold. From that standpoint, it's very important to everything that we're doing, from electrification to building. You think of construction, you think of your wiring and the plumbing that goes into houses. We see it in all sorts of electronics. Anywhere we see electricity needing to be transmitted, you'll find copper.

It's the second most conductible metal behind silver. Still, it's much more cost-effective than silver, costing about $4.45 a pound this morning versus about $37 per ounce for silver, which is why you tend to see copper being more in demand in applications than silver.

It also has a rapidly growing demand as we undergo the energy transition, rely on AI and data centers, and all the energy-intensive needs that result from them. We expect a structural supply deficit for the copper market in the coming years and decades.

Thalia Hayden: Great. Let's dive in now. Sprott provides the Sprott Copper Miners ETF, ticker COPP, and the Sprott Junior Copper Miners ETF, ticker COPJ. Why two different ETFs?

Steve Schoffstall: It's a great question because, at the surface, some similarities are important, and I think that sets the Sprott lineup apart from what we see in other strategies. First and foremost, both are pure-play strategies, and what we mean by that is that they have at least 50% of their revenue or assets tied to things like copper miners, producers, or explorers.

This pure-play test is very important in the copper market because only three of the 10 largest producers are actually publicly traded or have a majority copper ownership. Some companies that get 10% or 12% of their revenue from mining copper would be included in other ETF strategies.

In our strategies, we focus on companies that are predominantly copper producers. By focusing on these pure-play companies, I think investors will appreciate that they have a lot less unintended exposure relative to what they might have if it's more of a diversified-type product.

But when we look at some of the differences between the two funds, and there are a few important ones, I'd say first with COPP, which is an all-cap mining ETF, so large, mid, and small-cap. Then, as of June 23, it will also have the distinction of having about a 5% allocation of physical copper.

We've made this change to the index strategy in conjunction with Nasdaq. We think it adds a way for investors to access the copper market. The pure-play notion and the physical component are two things that are unique to this product compared to any other ETF on the market.

If we look at COPJ, it still has those pure-play characteristics, but it focuses more on smaller-cap miners, which tend to be more exploration and development-type companies. Investors often like the junior space because the underlying commodity tends to have more volatility or leverage. Often, the larger miners seek acquisition targets among the junior miners.

We've seen some conversations about these larger miners looking to grow in the copper space. They're looking for pure-play copper miners, and we think investors are gravitating towards them.

Thalia Hayden: Got it. Makes sense. Tech companies use a lot of electricity, and therefore, a lot of copper. Where do you see that demand going?

Steve Schoffstall: This area has ramped up over the last 12-18 months as AI has moved into the forefront. Copper has to be used not only to get electricity to the data center, but these data centers are very energy-intensive. We see copper being used often in favor of fiber optics, for example, because it runs much cooler than fiber optics does, which keeps the cooling costs lower.

Another benefit of copper as it relates to AI is its energy-intensive nature. At the same time, these tech companies have to grapple with this energy intensity while staying true to their clean energy mandates that they often have on a corporate level. We see that they're investing in things like wind and solar, and a lot of investments for data centers are going to nuclear power.

When you look at the renewable energy side, it tends to be very copper-intensive. It's about two-and-a-half times the amount of copper needed for a solar or wind installation compared to a traditional fossil fuel counterpart. To give you an idea of the growth that we see in this industry, out through 2030, AI is expected to require about five metric tons of copper through the rest of this decade. If we go out to 2050, it's anticipated that on an annual basis, AI will consume about 3 million metric tons.

Thalia Hayden: A recent legislation is looking to reduce or even eliminate tax breaks and incentives for renewables and EVs. How might that affect copper?

Steve Schoffstall: The EV story is an important part of overall copper demand, but it's not the only part. We have AI, as we discussed, and electrification as it's related to technology, higher standards of living, developing economies, and the energy transition. Those are all aspects that are contributing to copper demand.

One thing that tends to get lost in the discussion of EVs is that much of the growth we see in that market comes from Europe and China. If you divided the world into three separate sections: China, Europe, and the U.S., the U.S. would rank number three. Just last year, we had a little more than 17 million EVs sold on a global scale.

But what you're starting to see is, as you mentioned, some of the rollback of these subsidies. We see that playing throughout Europe in certain cases. We've seen growth still growing there, but it could have some impacts. I know there are some discussions here in the U.S. about rolling back some of those subsidies.

I think what might be the next wave on a global scale as those subsidies do get rolled back or if they do get rolled back, is that you might see governments moving from a carrot to more of a stick where now they're going to, instead of giving you a subsidy to purchase an EV, they might have additional taxes if you're buying gas-powered cars.

We've seen similar things happen in Norway. But I think how things play out in the U.S., at least in the near term, is that hybrids, and probably plug-in hybrids, will be the next step until we get to full electrification.

Thalia Hayden: Steve, what challenges do miners face when increasing the copper supply?

Steve Schoffstall: That's a great question. We see this pop its head up amongst a lot of critical materials. We see it with uranium and silver. Copper is no different. There's about, I'd say, four distinct things. You can make an argument that there's more than that.

But first, miners are grappling with declining ore grades. This means that they've mined out all of the easy-to-access material and have to move more dirt to get more copper out of the ground. We're seeing this issue.

Secondly, I think what you're seeing—and it's very much related to that—is that a lot of the copper miners are focusing on expanding production at existing mines because that's where the copper is. They know how to get there, and they're not investing as much in exploration as they should.

This leads to the third issue, which is a downstream impact: We're not having these major copper discoveries like we're accustomed to seeing. Over the last decade, we've had 239 copper discoveries. Of those, only about 14 would be considered major discoveries. While we're mining out these other mines that have been producing for decades, we're not finding these large discoveries to take over with that.

Finally, one area where hopefully some of the direction we've seen come out of the White House and the Canadian government is that they're looking to streamline the permitting process. I think that could go a long way toward shortening the lead time from discovery to production, which could be 15 years or more in many cases.

Thalia Hayden: Would you say investing in copper is like investing in gold, silver, and other precious metals?

Steve Schoffstall: I'd hesitate to say it's like a precious metal or on that same plane. I think if you were to choose one, it acts a little bit more like silver. The reason for that is that they're both conductive, as we talked about from an electricity standpoint, but silver is about 60% industrial at this point. While it retains some of those precious metals or monetary-type characteristics, it has a large percentage tied to an industrial base. There are some similarities with silver, but I don't think I'd assess that it acts like a precious metal.

Thalia Hayden: Is copper a good hedge against inflation?

Steve Schoffstall: I think you could see some of that. While it's not a precious metal, some aspects of the copper market and critical materials in general could lend themselves to being an inflation hedge. If you think about the energy transition, for example, about $2.1 trillion was invested last year. That's a trend that we've seen growing significantly year-on-year.

That spending is by nature inflationary, as you're pumping more dollars into a certain market. I think it depends on where you're looking in the industry. If you're a manufacturer or somebody who's creating and manufacturing copper wires, for example, you're going to be a cost-taker, so higher copper prices are going to hurt you.

Again, we tend to look upstream in the supply chain to those pure-play miners. In that case, we expect them to benefit from higher copper prices as they pull copper out of the ground. We expect that to impact their financial position with the higher copper prices positively.

Therefore, we tend to focus on the upstream companies and don't go downstream, where you have to worry. You could have the narrative right that you expect higher copper prices or higher demand. But based on the companies you're investing in, they might be price takers and subject to higher prices and negative consequences.

Thalia Hayden: Last question before you go, Steve, how might a copper ETF fit into most investors' portfolios?

Steve Schoffstall: We believe we're in the early stages of a structural uptrend in the copper market. With that, we do see some investors who look at copper, and they have a well-diversified portfolio and decide that, given the growth they expect out of the copper market, they put this into the growth sleeve.

We also hear from investors who might take a much more thematic approach. They could have a basket of companies or funds, usually the case, where they're investing in what they believe to be high-growth. We also see investors including copper or copper miners in those high-growth allocations.

Thalia Hayden: Steve, always great to see you. Thank you so much for your timely insights, and keep up the great work.

Steve Schoffstall: Absolutely. Talk to you next time.

Thalia Hayden: That does it for today's episode of Metals in Motion. Thank you for joining us. If you enjoyed the show, please tell us by hitting that like button in the comment section below. To learn more about the copper ETFs discussed on today's program, be sure to visit SprottETFs.com. I'm Thalia Hayden with ETFguide. Thanks for watching, and we'll see you next time.