Europe’s rearmament will boost industrial metals demand, with Goldman Sachs predicting a surge in copper prices. Defense stocks have already risen, with the MSCI Europe Aerospace and Defense Index climbing 72% this year. The EU’s commitment to increase military budgets could drive a windfall in the market.

Goldman estimates the defense sector accounts for about 3% of global demand for industrial metals, with the MSCI Europe Aerospace and Defense Index up 72% and the US-focused S&P Aerospace and Defense Select Industry Index climbing 31%. The rally in defense stocks follows the EU’s push to boost military budgets amid security concerns.

Goldman projects euro-area military spending to increase from 1.9% of GDP in 2024 to 2.7% by 2027, adding about 167 billion euros annually. Around 40% of the spending boost is expected to go towards metals-heavy equipment. Europe’s rearmament could lift overall demand for industrial metals by 6% by 2027.

Globally, Europe’s rearmament could add 0.9% to copper demand, 1.3% to nickel, and 0.4% to steel by 2027. Copper, a commonly used metal, is expected to see increased demand due to defense and AI infrastructure development. This demand could impact copper prices in the future.

The surge in AI data center infrastructure is also increasing copper demand. Goldman predicts upside risk to its 2026 and 2027 copper price forecasts, reaching $10,000 and $10,750 per metric ton respectively. Despite high inventories potentially capping gains in the near term, defense and AI demand could influence prices.

Read more at Yahoo Finance: Defense stocks aren’t the only winners of Europe’s spending blitz