By: Natalie Scott-Gray, Senior Metals Demand Analyst, EMEA and Asia region
Copper hit a record high on 13th May of $14,153/t, driven by robust forecasts for copper’s future demand in electrification and AI data centers, a focus on unforeseen supply risks (created from the Iran war), concerns over the pull of refined units into the US on Section 232 tariff expectations, alongside wider market appetites to hold strategic hard assets. However, set against a backdrop of historically elevated global stocks, anticipation of a relatively balanced refined market and a globally divergent view from speculators, the justification for record high copper was put into question. In this article we look at the realities in the copper market at present, in which global stocks and stocks ex-US have drawn down to their lowest level in seven months and February 2024 respectively. Are we at the start of copper’s physical market reflecting real world tightness and what does this mean for copper prices?
LME 3M Copper Price Performance 10Y
Copper closed at $13,765/t yesterday (29th July), 2.7% below its nominal high of $14,153/t. The key driver behind the recent bull rally has stemmed from focus on LME inventories, in which on-warrant stocks have fallen to their lowest level since January 2026 (~102,000t), resulting in a tightening effect across the forward curve with the Cash-LME 3M spread posting backwardations. The key driver for this unseasonal period of drawdowns is two-fold:
White House Fact Sheet on Investigation into Copper
Section 232 on Refined Copper - Scenario Analysis
COMEX-LME Dec/Dec Arbitrage Versus H2 Imports of Copper and Articles Thereof
Global Visible Exchange Stocks
LME Cancelled Warrants Jump on Draw for Units from the US and China
LME On-warrants are Depleting 
LME Copper Cash-3M Spread
Enter Chilean Winter Storms – Raising the Risks to Mine Supply?
On 20th July, Chile, the world’s largest copper mining country, declared a state of catastrophe in the Atacama and Coquimbo regions, following unusually severe winter storms linked to El Nino. At the time of writing, the storm has impacted ten regions in Chile, with the most detrimental impact concentrated in the central areas.
What do we know so far?
While the storms have affected a handful of major copper producers, most of these companies have reported impacts as temporary and limited, with contingency plans in place. Meanwhile, the largest copper mines in the country, based in the north, remain unaffected. However, following the developments in May in which Cochilco (Chile’s state Copper Commission) lowered its forward guidance for 2026 and 2027, citing lower ore grades, maintenance and operation constraints, Chile is already on track to post a second year of declining output. On a global scale, mine production is forecast to be flat this year, with the concentrate market on track to post a third year of significant deficits. In turn, this continues to weigh on Treatment and Refining charges (TCRCs) which turned negative in Q4 2025, before falling to their lowest level on record, squeezing smelter margines, especially ex-China.
Table of Reported Impacts on Copper Producers
Could we see a new record high for copper?
Looking at the final quarter of the year, there is a complex array of price drivers which could determine how copper performs. If we set this against a base case in which we expect a conclusion to the Iran war in the months ahead with no defined decision on Section 232 tariffs in 2026:
To the upside, we expect copper to be underpinned by heighted seasonal demand in China, which will further benefit this year from accelerated fiscal spending (given that only 44% of the country’s budget was spend in H1). Meanwhile, in the absence of any announcement over Section 232 on refined copper imports in 2026, we expect anticipation to build ahead of 1st January implementation deadline (set out in the Executive Order), which could increase arbitrage opportunities and support further US buying. Given the backdrop in which global visible inventories ex-US are at their lowest level since February 2024, a sustained inventory drawdown is likely to cement risks over real-world physical tightness in the copper market, which cannot be addressed in a timely manner by the slow-moving nature of the upstream supply chain. Furthermore, structural demand stemming from electrification, grid investment and the energy transition will continue to underpin long-term consumption forecasts, with the incentive to stockpile copper a theme, in our view, only in its infancy.
Having said this, we should not ignore the reality that the Iran war is now in its fifth month, with the World Bank cutting global growth to its lowest level since COVID-19. Despite PMI manufacturing readings having held up robustly over H1, in part supported by front-loading and reduced risk premium, the disruption to supply chains from crude oil to sulfur is building. Indeed, a key risk to higher copper prices comes from the outlook for US monetary policy. Our house view is for one Fed rate hike in December, but if inflation proves more persistent, that could be brought forward to September, strengthening the US dollar and capping copper prices.
Ultimately, the two themes that will determine whether copper reaches new highs are Section 232 and the Iran conflict. Our base case remains that no refined copper tariffs are announced in the near term and that geopolitical tensions gradually ease over the coming months. If that scenario plays out, we believe copper is well positioned for a bullish fourth quarter. That said, we continue to expect the exceptionally strong draw of metal into China to begin moderating through August, so the pace of tightening is unlikely to be maintained indefinitely.
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China's copper market is reshaping global trade flows as policy changes reduce scrap availability and increase demand for refined metal. Combined with falling inventories and stronger import incentives, these developments suggest China is becoming a more important driver of copper prices.
Copper hit a record high on 13th May of $14,153/t, driven by robust forecasts for copper’s future demand in electrification and AI data centers, a focus on unforeseen supply risks (created from the Iran war), concerns over the pull of refined units into the US on Section 232 tariff expectations, alongside wider market appetites to hold strategic hard assets. However, set against a backdrop of historically elevated global stocks, anticipation of a relatively balanced refined market and a globally divergent view from speculators, the justification for record high copper was put into question. In this article we look at the realities in the copper market at present, in which global stocks and stocks ex-US have drawn down to their lowest level in seven months and February 2024 respectively. Are we at the start of copper’s physical market reflecting real world tightness and what does this mean for copper prices?
The base metal index has come under pressure over the last week, with prices facing headwinds from the macroeconomic outlook, including fatigue over the Iran War, a US tech sell off and a pause in direction ahead of the July US FOMC monetary policy meeting. In our view, once the markets have digested the meeting, we will see base metals resume pricing with focus on the fundamentals, in which we are starting to see real world tightness for metals like copper, zinc and tin
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