Analysts say its higher prices are unlikely to derail data centre growth, but tighter supplies could stymie new capacity
[SINGAPORE] The volatility of the price of copper is hitting Asia-Pacific data centre developers harder than their global peers, with the region’s relatively inefficient power grids requiring larger amounts of copper for infrastructure.
Soaring copper prices are unlikely to derail the expansion of artificial intelligence-driven data centres, analysts have said, but they warn that tightening supplies of the metal could lengthen procurement times and delay new data centre capacity coming online.
Alexander Kheder, technology, media and telecommunications analyst at financial research firm BMI, noting that China produces around 60 per cent of the world’s refined copper, said that North-east Asia’s greater exposure to copper’s price volatility relative to other regions is structural rather than cyclical.
“That exposure is compounded by the relative inefficiency of Asia’s grids,” he said. Transmission and distribution losses there stand at 981 terawatt hours (TWh) for 2026, against 447 TWh in Europe and 504 TWh in the Americas.
Given that two-thirds of a data centre’s copper resides in its power infrastructure, the region’s copper intensity is likely higher amid power grid losses, Kheder added.
The Asia-Pacific is one of the fastest-growing data centre markets; its regional IT load is projected to expand at an average annual rate of 11 per cent between 2025 and 2028.
Undented demand #
Analysts say that while elevated copper prices are unlikely to halt the expansion of regional data centres, a supply crunch could delay the building of AI data centres.
Because copper accounts for only 0.5 per cent of the cost of a data centre project, developers are likely to be “indifferent” towards certain price swings, said Alexandra Symeonidi, senior corporate credit and sustainability analyst at global financial services firm William Blair.
She said in a specific reference to hyperscalers: “Despite high prices, we have seen Asia purchases relatively inelastic compared to previous years, when the thematic and structural parts of copper demand like the energy transition and AI were not yet evident.”
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Meanwhile, BMI’s Kheder said that longer lead times for the procurement of copper-dependent transformers and cabling could stall the building of new capacity.
“Operators will substitute (copper) at the margin. However, copper will more likely remain a bottleneck at the power layer,” he said.
How about a swop?
Aluminium is a cheaper substitute for copper, but the reddish metal’s higher electrical conductivity makes a full substitution unlikely, especially in hyperscaler data centres where efficiency is key.
Alex Ho, sales trader at CMC Markets Singapore, noted that at current price levels, data centre developers could save more than 30 per cent by switching from copper to aluminium for certain parts.
But he maintained that structured cabling and high-density interconnects still have to be made of copper because compliance and failure risks rule aluminium out.
“That makes substitution a margin exercise, rather than a way out of the metal,” he added.
Steve Raye, director at construction consultancy Linesight, acknowledged that while aluminium is “gaining traction” in areas where technical requirements allow for it – particularly in power transmission and distribution cables – its adoption in critical data centre equipment “remains limited”.
Who bears the higher costs? #
Against this backdrop, industry observers expect higher copper costs to cascade through the value chain, with the bearer of the final cost burden depending on market conditions and contractual arrangements.
Kevin Gardiner, director for the Gulf Cooperation Council at Linesight, said that copper is embedded in long-lead electrical packages, which are custom-manufactured power components that take up to years to produce.
“When pricing is unstable, projects can face more supplier repricing …and increased pressure on contingency.
“Despite these issues, copper is not always treated as a priority risk in early planning. For data centre clients, this creates a clear need to assess copper exposure earlier in the planning process,” he said.
Linesight’s Raye said that in the short term, the allocation of cost depends on the project delivery model and the contract structure of the various data centres.
“Where material price escalation clauses are included, contractors may be able to pass some or all the increase back to the developer, reducing their exposure to the volatility of copper prices,” said Raye.
BMI’s Kheder noted: “The party with the weakest hedging capability and the thinnest contractual protection, often the mid-tier operator or specialist subcontractor, is therefore the one that absorbs the volatility.”
Ho of CMC Markets agreed that there is no single point where the cost lands. “Engineering, procurement, construction and electrical contractors take the first hit, since cabling, busbars, transformers and switchgear are core bill-of-materials items.”
While data centre operators are expected to pass these costs on to customers to protect their margins, not all tenants face the same exposure. “Hyperscale tenants on fixed multi-year leases are the best protected group in the chain,” Ho said. “Real exposure lands on the smaller co-location or enterprise client signing on new capacity or coming up for renewal, because that’s where operators reprice to protect (their) margins.”
Uneven regional impact #
Across the Asia-Pacific, the impact of volatile copper prices is unlikely to be evenly distributed. “Copper’s cost has joined power as the second binding constraint on the region’s data centre development,” Ho said.
Japan and Singapore carry the highest absolute copper exposure of around US$16 million per MW and US$14.14 million per MW, respectively, he said.
The bigger incremental exposure belongs to India, Malaysia and mainland China, “where most capital expenditure is still uncommitted, and greenfield pipelines leave less room to lock pricing in early”, said Ho.
BMI’s Kheder said copper is ultimately a manageable risk through “hedging and disciplined procurement”.
Even so, as Asia races to build AI infrastructure, securing sufficient copper is becoming almost as important as securing the electricity to power it.
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