Head of Commodity Strategy
Copper has extended its rally in 2026, trading around 14% higher year-to-date and roughly one-third above levels seen a year ago. While the magnitude of the move has raised concerns about demand destruction and speculative excess, the underlying story continues to strengthen. Mine supply is struggling to keep pace with demand, smelters are fighting over scarce concentrate, strategic stockpiling remains widespread, and US tariff uncertainty is pulling metal away from the rest of the world.
At the same time, copper demand is becoming increasingly tied to strategic sectors such as power infrastructure, electrification, artificial intelligence, and defence. This shift may not eliminate the commodity’s traditional cyclical tendencies, but it is helping create a market where demand is potentially less sensitive to economic slowdowns and high prices than in previous cycles.
As a result, copper increasingly finds itself at the intersection of industrial growth, energy security, technological expansion, and geopolitical competition.
The bullish copper narrative ultimately begins with supply, and here the market continues to face challenges. After major disruptions at Grasberg and Kamoa-Kakula contributed to an estimated 1.5 million tonnes of lost production in 2025, supply disappointments have continued this year. Downgrades from major producers, lower production guidance in Chile, and slower-than-expected recoveries at several key operations have kept the market on edge. Industry estimates suggest supply disruptions have already removed around 450,000 tonnes from expected production this year.
The problem is not necessarily a lack of resources. Rather, it is the increasing difficulty of bringing new supply online quickly and efficiently. Large copper projects require significant capital investment, long development timelines, complex permitting processes, and stable operating environments. At the same time, ore grades continue to decline at many mature operations, increasing production costs and reducing operational flexibility.
The result is a market where supply growth remains persistently vulnerable to disruptions, delays, and underperformance.One of the clearest signs of stress within the copper supply chain can be found in the treatment charge market. Treatment charges, the fees miners pay smelters to process concentrate into refined metal, have collapsed to deeply negative levels, with spot assessments recently heard around minus USD 115 to 118 per tonne.
While treatment charges are often overlooked outside the industry, they provide one of the clearest real-time indicators of concentrate availability. Negative treatment charges effectively signal that smelters are competing aggressively for feedstock because there is simply not enough concentrate available.
The collapse reflects the combination of weaker mine production, delayed project ramp-ups, and constrained scrap availability. Chinese refined copper production has already shown signs of slowing, and further downside risks remain if concentrate shortages persist.
For now, strong sulphuric acid prices are helping support smelter margins and reducing the risk of widespread production cuts. However, they do little to change the underlying message: the bottleneck remains firmly upstream at the mine level.
Historically, copper has been viewed as one of the purest indicators of global economic activity. Its widespread use across construction, manufacturing, and consumer goods earned it the nickname “Dr Copper”. That relationship still matters, but the composition of demand is changing.
An increasing share of future copper demand growth is expected to come from power generation, transmission infrastructure, electric vehicles, battery systems, artificial intelligence data centres, and defence-related spending. Much of the copper demand associated with AI is indirect, driven not by the servers themselves but by the enormous investments required in grids, substations, transformers, and power distribution systems.
At the same time, governments across Europe and North America are increasingly viewing electricity networks as critical national infrastructure. Ageing grids, electrification targets, and energy security concerns are driving investment programmes that are likely to extend well beyond the normal business cycle.
This evolution matters because these sectors tend to be less sensitive to economic slowdowns and high commodity prices than traditional cyclical demand sources such as housing, appliances, and consumer electronics. In short, copper demand is increasingly being driven by the need to generate, move, store, and secure electricity.
Another major theme that has supported copper last year and again recently has been the growing divergence between the US and the rest of the world. The at times widening premium of COMEX copper over London Metal Exchange prices has created a powerful incentive for metal to flow into the United States ahead of a potential decision on refined copper import tariffs.
As a result, the United States has attracted significant volumes of refined copper imports that does not reflect its relative small share of overall global demand, so while inventories build in the U.S. availability is reduced elsewhere, tightening conditions across the rest of the market.
The upcoming US Commerce Department report, due by the end of June, represents a potentially important catalyst. A recommendation supporting future tariffs could encourage further inventory accumulation ahead of implementation, while a decision not to proceed could trigger an unwinding of the current premium and some temporary pressure on prices.
For now, however, tariff uncertainty continues to act as a tightening mechanism for the global market.
Visible inventories have increased this past year, particularly in COMEX warehouses. On the surface, this might appear inconsistent with the bullish supply narrative. However, inventory levels increasingly reflect strategic behaviour rather than pure market fundamentals.
The concentration of metal in the United States ahead of a possible tariff regime highlights how policy considerations are influencing inventory decisions. At the same time, strategic stockpiling by governments, industrial users, and supply-chain managers appears to be limiting the amount of copper available to the wider market. It highlights an emerging trend with consumers of key commodities, such as copper, moving from a "just in time" to a "just in case" strategy.
This development may help explain why copper prices continue to remain elevated despite periodic signs of slower physical demand. The market is increasingly assigning value to security of supply, not simply immediate consumption needs.
COMEX copper continues to trade within a constructive technical structure. Following its failure near USD 6.72 per pound on 13 May, prices corrected lower before finding support around USD 6.15, the 31.8% retracement of the March to May rally as well as a former resistance area that has now turned into an important support zone. The successful retest reinforces the broader uptrend, which remains characterised by a sequence of higher highs and higher lows.
As long as copper holds above the USD 6.15 area, the technical outlook remains supportive, with a renewed challenge and break above USD 6.72 opening up for a move towards USD 7.00 per pound, a major psychological milestone. Conversely, a decisive move back below support would weaken the bullish technical picture and raise the risk of a deeper correction, with support - as per the chart - after that being USD 6 followed USD 5.8.
Several major investment banks have recently upgraded their copper outlooks. Forecasts for sizeable refined market deficits over the next two years have pushed average price expectations steadily higher, with some analysts now discussing the possibility of prices reaching USD 15,000 per tonne in London against a current price closer to USD 14,000 should supply shortfalls persist.
While supply growth continues to disappoint, strategic demand drivers remain intact, and policy developments are reinforcing concerns about future availability. However, the market is no longer cheap.
Copper is trading close to record levels, and high prices will inevitably test demand elasticity, particularly in China where buyers have historically shown sensitivity to elevated prices. Early signs of slowing orders from parts of the manufacturing sector suggest that some demand destruction risks remain present.
In addition, the outcome of the US tariff review introduces a significant binary risk. While tariff implementation could tighten the market further, a decision not to proceed would likely remove an important source of support.
Ultimately, copper’s long-term story remains one of tightening supply meeting increasingly strategic demand. But after a powerful rally, the next phase is likely to require confirmation from both physical market fundamentals and policy developments. The bull market remains intact, but it has become increasingly dependent on delivering the supply deficits that many now expect.
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