Bank of America Securities: Rising defense spending ignites metal "military-industrial dividend" with structural strong growth in aluminum and copper demand
Bank of America Securities released a research report indicating that with the globalization of multipolarity, the rising defense spending is increasingly impacting metal demand. NATO has committed to spending 5% of GDP on defense, which is expected to drive structural growth in the demand for aluminum and copper. In 2024, NATO countries' spending on core defense is projected to be USD 507 billion, and if the 3.5% GDP target is met, an additional USD 371 billion will be spent. It is expected that by 2030, the annual demand for aluminum and copper will increase to 1.6 million tons and 553,000 tons, respectively, primarily driven by equipment spending. In addition, the post-war reconstruction of Ukraine will further increase metal demand
According to the Zhitong Finance APP, Bank of America Securities has released a research report indicating that as the world becomes increasingly multipolar, defense spending and its impact on metal demand are receiving more attention. Defense spending is on the rise, and NATO's latest commitment to allocate 5% of GDP to defense highlights this point. If spending focuses more on equipment and infrastructure rather than personnel (which seems to be the case currently), minerals will disproportionately benefit.
Structural Growth in Defense Metal Demand
Estimating defense metal demand faces challenges: countries rarely disclose detailed spending items, and the metal content of equipment is difficult to quantify accurately. However, the upgrade of NATO's spending targets is a key driving factor. In 2024, NATO countries (excluding the United States) will spend $507 billion on core defense; if the 3.5% GDP target is reached, an additional $371 billion will be spent.
Taking Germany as an example, its defense budget is planned to increase from €62.4 billion in 2024 to €154 billion in 2029, with equipment procurement accounting for 40%, driving up metal demand.
A 2009 audit by the U.S. Department of Defense showed annual demand for aluminum and copper at 275,000 tons and 106,000 tons, respectively; Bank of America Securities expects this to rise to 1.6 million tons and 553,000 tons by 2030, primarily driven by equipment spending. For instance, in infrastructure investment, every million dollars spent requires 3 tons of aluminum and 4 tons of copper, aligning with NATO's infrastructure target (1.5% of GDP).
Post-war reconstruction in Ukraine is singled out as the "second battlefield" for metal demand. Institutions like the World Bank estimate that direct damages have risen to $170 billion, with total reconstruction costs ranging from $543 billion to $1.23 trillion.
Bank of America uses two methods to estimate the "installed metal amount" and the rate of destruction. If reconstruction takes 10 years, there could be an additional annual demand of 200,000 tons of copper (0.65% of the global market), 750,000 tons of aluminum (1.1%), and 17.6 million tons of steel (1%); if it takes 14 years with a $1 trillion reconstruction cap, copper demand could reach 1.8 million tons (6.8% annual market), aluminum 720,000 tons (1%), and steel 16 million tons (1.8%). Although the proportions seem moderate, in the context of global copper production growth of only 2% per year, the additional basis points of demand could tighten an already strained market further.
Conclusion
Bank of America Securities states that defense modernization and post-war reconstruction will jointly drive metal demand, steepening the demand curves for copper, aluminum, and steel, while strategic minor metals like rare earths, gallium, and germanium become bottlenecks. Spending efficiency, technological routes (lightweight, intelligent, unmanned), and geopolitical games will determine the final intensity of metal consumption
