Wood Mackenzie: Geopolitical supply shocks and AI power crunch collide across global base metals
LONDON/HOUSTON/SINGAPORE, Oct. 22, 2026 (GLOBE NEWSWIRE) -- FOR IMMEDIATE RELEASE
Wood Mackenzie | www.woodmac.com
Geopolitical disruptions, resource nationalism and an escalating power crunch are reshaping global base metals markets, according to Wood Mackenzie's latest analysis. As the global data centre pipeline surpasses 250 GW, demand for power infrastructure is accelerating competition for copper, aluminium and other strategic materials.
The metals impact of AI extends well beyond data centres themselves. Transmission networks, substations and dedicated power generation can require three to four times more metal than the facilities they support, creating a new source of structural demand alongside electrification and energy security investment.
Yet upstream investment is struggling to keep pace. Despite elevated commodity prices, project sanctioning remains below expectations as permitting delays, geopolitical uncertainty and increasing project complexity weigh on investment decisions. The challenge comes as governments place greater emphasis on supply-chain resilience and critical mineral security.
"Data centres represent an economy-wide power infrastructure challenge, but the bigger story is the collision between accelerating demand and increasingly complex supply delivery," said Lindsay Grant, Vice President of Metals and Mining Research at Wood Mackenzie. "High prices should trigger investment, yet project sanctioning remains below expectations. Without faster approvals and investment commitments, the industry cannot deliver the mine supply needed to support future growth."
Wood Mackenzie's analysis highlights four structural themes shaping metals markets and investment decisions through 2036.
Wood Mackenzie's analysis identifies four structural data points shaping base metals markets through 2036.
- Copper: Record prices of US$14,759/t reflect severe refined market dislocation, with US stockpiling pushing domestic cover above 170 days while leaving the rest of the world in a 460 kt deficit. While Chilean mine output falls 5.2% in 2026, global mine supply is set to expand by more than 5% next year, ending three years of stagnant growth.
- Aluminium: A supply shock from Middle East smelter damage cut almost 2% of global primary output, driving a 1 Mt deficit in 2026 despite Chinese operating rates reaching 99% and Indonesia producing 1.3 Mt. While the market is projected to return to surplus in 2027 as Indonesian output scales toward 3 Mt by 2030, underlying fundamentals remain supportive.
- Nickel markets are expected to rebalance in 2026 as Indonesian supply restrictions curb production, with Class 2 supply tightening from 2027. Despite Class 1 oversupply and weak battery demand, prices are forecast to recover towards US$19,000/t by 2030, subject to Indonesian policies and sulphur supply disruptions.
- Lithium and energy storage: lithium carbonate prices up approximately 130% from mid-2025 lows, yet raw lithium carbonate represents just 2% to 3% of turnkey storage project costs; US$60 billion invested in the lithium supply chain over the past decade, with US$150 billion to US$250 billion more required through the 2050s.
Electrification, geopolitics and AI: the demand context
Wood Mackenzie is tracking more than 250 GW of data centre projects globally, over three times the pipeline a year ago. AI data centre electricity demand is forecast to increase fivefold between 2025 and 2030 and exceed 1,000 TWh by 2035. In Asia Pacific, demand is projected to nearly triple by 2030, while grid constraints are increasingly forcing operators to consider higher-cost microgrid and off-grid power solutions. In Japan, data centres come online in less than five years against upwards of ten for grid upgrades, driving adoption of microgrids and off-grid generation at two to three times the cost of grid-connected power.
Copper: Supply constraints and inventory hoarding mask underlying demand
Physical copper markets remain distorted by US stockpiling and trade policy, which have pushed inventory cover above 170 days domestically while leaving the rest of the world with just 48 days and a 450 kt deficit. Although global mine supply is expected to grow by more than 5% next year, the longer-term challenge is investment. Wood Mackenzie estimates the industry must deliver approximately 850 ktpa of new greenfield copper supply annually over the coming decade, yet permitting, geopolitical risk and increasing project complexity continue to constrain development.
Aluminium: primary deficits and grid substitution
The aluminium market faces a supply shock this year after attacks in the Middle East damaged two of the world's largest smelters, knocking out almost 2% of global primary production and pushing the 2026 balance into a 1 Mt deficit. High aluminium prices and premiums, combined with low alumina costs, encouraged smelters worldwide to ramp up capacity and restart idled electrolytic cells. This was particularly evident in China, where operating rates reached 99% and output slightly exceeded the national capacity cap.
However, this additional volume and Indonesia's rapid growth (reaching 1.3 Mt in 2026 and scaling to just under 3 Mt by 2030) were not enough to eliminate the shortfall. While the market is projected to return to surplus in 2027 as prices soften, medium-term fundamentals remain supportive, leaving faster-than-expected Indonesian expansion and broader economic weakness as the only notable downside risks.
Nickel: structural bifurcation between Class I and Class II
The nickel market is returning toward balance in 2026 following several years of oversupply, with global refined output contracting by 2% in the first annual decline since 2015. However, this headline stability masks a deep structural bifurcation. The Class II segment faces widening deficits from 2027, as Indonesian NPI production consolidates below its 2025 peak under the weight of tighter RKAB mining quotas, falling ore grades, and recent El Niño-related drought disruptions.
In response, Chinese stainless steel mills are structurally increasing their use of scrap and Class I cathode in melt mixtures to hedge against shrinking NPI availability. Conversely, the Class I and chemical segments face ongoing surplus from expanding Indonesian HPAL projects and Chinese refining capacity, though localised sulphur supply constraints and power bottlenecks continue to present operational risks to new project delivery.
Battery technology and energy storage: LFP dominance and the chemistry transition
LFP will dominate the mass battery market through 2030, driven by Chinese exports, rapid gigafactory expansion and significant advances in charging speed. CATL's third-generation Shenxing battery targets a 10% to 80% charge in under four minutes. European automakers are pivoting toward LFP to preserve margins as global EV adoption accelerates across Europe and emerging markets, though subsidy changes have stalled US momentum.
Beyond LFP, alternative chemistries are advancing on distinct timelines. In April 2026, CATL secured a three-year, 60 GWh sodium-ion supply agreement with HiTHIUM Energy Storage, marking the technology's transition to industrial-scale commercialisation, with large-scale shipments in China beginning in Q3 2026. Wood Mackenzie projects battery module cost parity between sodium-ion and LFP by 2035. Solid-state battery mass-production timelines have compressed toward 2030, supported by strong Chinese policy backing.
Lithium and storage economics: capital requirements and price dynamics
Lithium carbonate prices fell to a multi-year low in mid-2025 before rebounding approximately 130% by 2026, but this volatility does not translate directly into higher project costs. Raw lithium carbonate represents just 2% to 3% of total costs in a typical 100 MW, four-hour turnkey storage system. An 83% price rise in Q1 2026 translated to only a 9% increase in LFP cell prices and an approximate 10% rise in turnkey system costs. Reference price lags of four to eight months provide further insulation, though cell offer validity periods have tightened to as little as two weeks.
Investors have deployed US$60 billion in the lithium supply chain over the past decade, supporting a tenfold increase in global refined chemical supply. Meeting demand through the 2050s will require a further US$150 billion to US$250 billion. Chinese developers achieve significantly higher capital efficiency than Western counterparts, meaning equivalent investment delivers proportionally more production capacity. Western markets need to broaden their capital pools to support ex-China supply chain development and safeguard domestic automotive manufacturing.
Across copper, aluminium, nickel and lithium, the common thread is that future supply depends on investment decisions being made today," Grant added. "Markets are adapting to a world where security of supply, energy availability and geopolitical considerations increasingly sit alongside cost competitiveness in shaping investment outcomes.
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Background
These findings were presented at the Wood Mackenzie LME Forum in London on 21 October 2026, which examined the impact of geopolitics, decarbonisation and AI on electrification and base metals markets. Australia has separately legislated that large-scale data centres must return as much renewable energy to the grid as they draw from it. Wood Mackenzie subject matter experts are available for interview across copper and aluminium markets, critical minerals policy, battery technology and energy storage, rare earths, and AI data centre power demand. Please contact Wood Mackenzie’s global communications team to arrange interviews.
Chris Boba Wood Mackenzie chris.boba@woodmac.com