Copper prices hit fresh record highs this week, driven by two dominant forces: China’s shift toward stronger economic support and rising expectations that the US Federal Reserve will begin cutting interest rates soon. Together, these factors have pushed investors toward the metal, while simultaneously amplifying concerns about a potential supply deficit by 2026.
On the London Metal Exchange, the benchmark three-month copper contract touched $11,771 per ton, while Shanghai contracts climbed toward 93,300 yuan per ton. Futures in New York and Mumbai moved in the same direction, underscoring the global breadth of the rally.
China’s push for growth ignites copper’s surge
The latest rally began after a key meeting in Beijing, where Chinese leaders declared that supporting economic growth would be the top priority for 2026, pledging a “more proactive” fiscal stance and a “moderately accommodative” monetary policy. Investors interpreted this as a clear signal of renewed stimulus.
A significant portion of this spending is expected to flow into upgrades of power grids, renewable energy systems, data centers, and high-performance computing—sectors that consume vast amounts of copper.
Stronger Chinese trade data added to the momentum, with exports rising in November and pushing the annual trade surplus above $1 trillion for the first time. Shanghai copper finished the session up about 1.5%, setting a new closing record.
Long-term trends are reinforcing the optimism. The International Energy Agency expects refined copper consumption to reach 33 million tons by 2035 and 37 million tons by 2050, compared with around 27 million tons in 2024, suggesting that structural shortages may emerge in the years ahead.
US rate cuts add more fuel to the rally
Monetary expectations have also played a crucial role. The Federal Reserve on Wednesday cut interest rates by 25 basis points.
Rate cuts typically weaken the US dollar, making dollar-denominated commodities such as copper cheaper for global buyers. At the same time, concerns that the US might impose tariffs on refined copper have prompted American buyers to accelerate stockpiling.
Withdrawals from LME warehouses continue to rise, while US Comex inventories have reached record levels. Outside the US, however, supply tightness is worsening.
Chinese smelters plan to cut refined copper output by roughly 10% due to falling treatment charges and a shortage of concentrate supply. Analysts at GF Futures and Citic Securities warn of a potential 450,000-ton deficit by 2026. Citic also expects the market to require average prices above $12,000 per ton in 2026 to stimulate new mining investment.
Supply strains in Chile and Peru heighten market pressure
Copper supply remains under visible stress. Production disruptions in Chile and Peru—which together provide nearly 40% of global mined copper—have slowed output. Several mines are facing declining ore grades, water shortages, and delays in government approvals.
Data from the International Copper Study Group (ICSG) shows that global refined copper supply grew just 1% in 2024, while mine output rose by less than 2%, highlighting the sluggish pace of new supply.
These constraints have increased attention on future projects, including early-stage developments by Filo Corp in Argentina, Ivanhoe Electric in the US, and Hudbay’s Copper World project in Arizona. Although still years away, they form an important part of the long-term supply outlook.
Market outlook: sharp volatility ahead in 2026
Copper markets are bracing for a period of heightened volatility. Even with prices at record levels, the underlying drivers remain fragile.
LME inventories have fallen to extremely low levels compared with the past decade, while demand from key industrial sectors remains strong. This leaves the market vulnerable to abrupt price swings from even minor shifts in supply or demand.
Analysts warn that conditions in 2026 could be even tighter, as demand surges from electric vehicles, renewable energy systems, power-grid expansion, and data-center construction. A single electric vehicle can use up to four times the copper required for a gasoline-powered car.
Solar and wind installations require large amounts of copper-intensive wiring and transformers, while AI data centers and cloud-computing infrastructure are becoming a rapidly growing source of demand.
On the supply side, growth remains too slow. Many mines in Chile and Peru are facing declining ore quality, requiring more rock to be processed to produce the same amount of metal.
Environmental regulations, community-approval hurdles, and water scarcity have also delayed new projects, making supply responses to demand shocks increasingly difficult.
Financial conditions add another layer of risk, as additional US rate cuts or a weaker dollar could attract more investment into copper, while a global slowdown or weaker Chinese demand could trigger sharp price corrections.
Many analysts expect copper to be one of the most volatile commodities through 2026, given strong long-term demand and fragile short-term market conditions.
Research forecasts indicate that the refined copper market will remain in deficit for several years. J.P. Morgan projects a 330,000-ton deficit in 2026, with prices reaching around $12,500 per ton in the second quarter of 2026 and an annual average near $12,075.
The bank sees rising demand—especially from data centers, electrification, and power-grid modernization—providing major upward support, while tight supply and low inventories maintain price pressures.
Meanwhile, ICSG data shows only modest growth in mine and refined-copper supply, pointing to a structurally tight market even if prices ease slightly from current highs.
Copper enters a new phase
Copper’s surge to record highs is not a short-term phenomenon. China’s new stimulus plans, the prospect of further US rate cuts, and persistent supply problems in major producing countries are all propelling the market upward simultaneously.
With inventories low and project development slow, the market has entered a period of sustained tension.
Given copper’s importance to clean energy, electrification, and digital infrastructure, demand is likely to continue expanding in the years ahead. As a result, today’s tight conditions may persist well into 2026 and beyond.
During US trading, December copper futures rose 1.6% to $5.43 per pound as of 14:57 GMT.
