Key Points
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Copper demand is rising due to electrification, EVs, and AI infrastructure.
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Freeport-McMoRan is the leading U.S. copper producer and has potential for production expansion.
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Supply constraints could benefit copper prices and therefore Freeport-McMoRan’s prospects.
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Freeport-McMoRan (NYSE: FCX) is not a pure-play energy company, but it is definitely a play on the energy transition and the associated electrification megatrend, including the massive wave of investment in artificial intelligence (AI) infrastructure. All of these technologies imply ongoing growth in demand for copper, and that’s where Freeport-McMoRan comes in.
Copper is the best metal to play the energy transition
The company is the largest producer of copper in the U.S. and “supplies approximately 70% of the refined copper produced domestically,” according to management. That makes it the key domestic supplier of a metal that’s crucial to electricity applications. As such, Freeport-McMoRan would be a major beneficiary of a move by the Trump administration to extend tariffs on copper to refined copper products.
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The key driver of copper demand is electrical applications, with more than 65% of the world’s copper used for electricity purposes. That demand is set to increase due to the relatively higher copper content in EVs compared to internal combustion engine vehicles (EVs have more than double the amount of copper due to extensive wiring). Solar panels are also copper-intensive, and copper is also needed to connect renewable energy to the grid.
Moreover, AI data centers are highly energy-intensive, and S&P Global estimates that the data center demand for U.S. electricity will rise from 5% of total electricity demand in 2025 to as much as 14% by 2030.
In a nutshell, the demand outlook for copper is strong, and it’s driven by electrical applications.
Image source: Getty Images.
The supply side of the copper price equation
Demand is one thing, and supply is another. If copper prices are set to continue rising (currently trading near an all-time high of about $6.50 per pound), a demand-supply imbalance is highly likely. That’s probably going to be the case given declining ore grades, rising costs, and the difficulty of acquiring mining permits.
All of the above considerations imply industrywide difficulty in matching supply to demand — which is usually good news for prices. However, Freeport-McMoRan has significant potential to expand its supply through a low-cost leaching initiative and brownfield expansion plans, including in the U.S.
It will need these plans, according to Wall Street, because the analyst consensus, per Visible Alpha, is for its overall copper production to plateau in 2031 at about 4.4 billion pounds.
Image source: Getty Images.
A stock to buy?
The price of copper keeps rising, as do the threats of tariff actions, to the benefit of U.S. producers, and demand remains robust, while industrywide supply growth remains constrained. These things make Freeport-McMoRan a great way to play the energy transition and AI-led demand for electricity. Throw in the company’s potential to expand its own supply, and it’s an attractive stock for energy bulls.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends S&P Global. The Motley Fool has a disclosure policy.
