Bank of America Merrill Lynch: Rising defense spending ignites the "military industrial bonus," aluminum and copper demand sees strong structural growth.

Bank of America Securities released a research report pointing out that as the world becomes more multipolar, defense spending and its impact on metal demand are receiving more attention. Defense spending is on the rise, with the latest NATO commitment to allocate 5% of GDP to defense highlighting this trend. If spending is more focused on equipment and infrastructure rather than personnel (as it appears to be currently), then mineral resources will disproportionately benefit. Structural growth in defense metal demand Estimating defense metal demand faces challenges: few countries disclose detailed expenditure items, and it is difficult to quantify the metal content of equipment accurately. However, the upgrade of NATO expenditure targets is a key driving factor. By 2024, NATO countries (excluding the US) will spend $507 billion on core defense; if they reach the 3.5% of GDP target, 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%, boosting metal demand. A 2009 audit by the US Department of Defense showed annual demands for aluminum and copper of 275,000 tons and 106,000 tons respectively; Bank of America Securities predicts that by 2030, these numbers will increase to 1.6 million tons and 553,000 tons, mainly driven by equipment expenditure. For example, in infrastructure investment, every million dollars spent requires 3 tons of aluminum and 4 tons of copper, matching the NATO infrastructure target (1.5% of GDP). The post-war reconstruction in Ukraine has been singled out as the "second battlefield" for metal demand. Institutions like the World Bank estimate that direct destruction has increased to $170 billion, with total reconstruction costs ranging from $543 billion to $1.23 trillion. Bank of America measures metal demand using the methods of "installed metal quantities" and destruction rates. If reconstruction takes place over 10 years, annual demand may require an additional 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 reconstruction takes 14 years and reaches a maximum of $1 trillion, 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 may seem modest, in the context of a global copper production growth rate of only 2% per year, an additional few tenths of a percent increase is enough to further tighten the already tight market. Conclusion Bank of America Securities states that defense modernization and post-war reconstruction will jointly drive up metal demand, with copper, aluminum, and steel demand curves steepening, and strategic minor metals such as rare earths, gallium, and germanium becoming bottlenecks. Expenditure efficiency, technological routes (lightweight, intelligent, unmanned), and geopolitical power games will determine the ultimate intensity of metal consumption.