Supply Crunch and Tariff Uncertainty Drive Copper to Record Heights in 2025‑2026 Rally

Copper reached an unprecedented price milestone on January 6, driven by mounting supply constraints and growing anxiety over international trade policies. Spot prices on the London Metal Exchange (LME) surged 3.1 percent to US$13,387.50 per metric ton before moderating to above US$13,200—representing a remarkable 30 percent appreciation since October. This breakthrough comes after the metal crossed the US$12,000 threshold in late December, signaling sustained bullish momentum across commodity markets.

The metal’s surge reflects its critical role in modern economies. Copper flows through construction, electrical infrastructure, renewable energy systems, and the rapidly expanding artificial intelligence ecosystem—making it essential to both traditional and cutting-edge industries. The price surge, however, masks deeper structural challenges in the global supply chain that extend beyond temporary disruptions.

Why Copper Supply Remains Severely Constrained

Production headwinds are intensifying at major operations worldwide. Freeport-McMoRan’s Grasberg complex in Indonesia has contended with operational challenges throughout 2024, while Capstone Copper’s Mantoverde mine in Chile—a crucial source in the world’s second-largest copper-producing nation—faced strikes that dimmed output expectations. These disruptions occur at a time when aging mining infrastructure requires substantial capital investment to maintain current production levels.

Trade policy adds another dimension to supply tension. Ahead of potential US tariff implementation, buyers have rushed to import refined copper into American markets, creating artificial scarcity elsewhere and depleting traditional distribution channels. Warehouse inventories paint a complex picture: Comex stocks have climbed beyond 450,000 metric tons, yet this figure masks regional imbalances and the concentration of used copper recycling challenges, where secondary supply sources struggle to keep pace with industrial demand.

The 2026 Demand-Supply Imbalance Widens

Looking ahead, structural forces favor sustained price strength. New production capacity remains years away from meaningful contribution—Arizona Sonoran Copper Company’s Cactus project and the long-delayed Resolution mine in the US both face multi-year timelines. Meanwhile, demand catalysts continue multiplying globally.

China, representing the world’s largest copper consumer, is expected to prioritize infrastructure and energy transition projects despite property sector headwinds, supporting sustained consumption growth. Analysts including StoneX’s senior metals demand researcher emphasize that while tariff-driven inventory builds have temporarily masked underlying tightness, the fundamental demand story remains intact.

Industry forecasters paint a bullish long-term picture. A United Nations analysis suggests global copper demand could surge 40 percent by 2040, requiring significant capital deployment and new mining capacity simply to prevent shortages. Wood Mackenzie projects a 24 percent demand increase through 2035, while the International Copper Study Group warns of a potential 150,000 metric ton deficit in refined copper during 2026 alone—highlighting why prices may remain elevated even as used copper and recycling infrastructure develop to partially offset supply gaps.

The intersection of supply constraints, geopolitical trade dynamics, and accelerating energy transition demand creates a confluence rarely seen in commodity markets, positioning copper as a structural winner in the years ahead.