Summary of Key Points
International copper prices have been on the rise recently, with LME copper returning to the $14,000 mark and US copper approaching record highs. There are three main reasons for this: first, the possibility of the United States imposing tariffs on refined copper imports, leading traders to rush to ship copper to the US in advance and causing shortages in other regions around the world; second, supply constraints (declining production in major copper-producing countries such as Chile and insufficient capacity from mining companies); third, strong demand driven by AI and energy transition initiatives. Institutions predict that copper prices could challenge the $15,000 level, but whether the tariffs are implemented is a critical factor.
1. Expectations for US Tariffs: Traders "Rushing to Ship Copper" to Avoid Taxes
Former US President Trump instructed a study on taxing refined copper (20% starting in 2027). After the Department of Commerce submitted its report in June, the president has a 90-day window to decide whether to implement the tariffs (as early as September or by the end of the year at the latest). To avoid future tax costs, traders have begun to ship copper to the US:
- In July, US copper imports exceeded 200,000 tons, the highest for a single month since 2014;
- COMEX (New York copper futures) inventory has increased by more than 40% this year, reaching a record high, with some estimates suggesting that total US inventory could exceed 1 million tons (a century-long record).
In simple terms, shipping copper to the US now avoids future tariffs, so everyone is doing it—this is known as "tariff arbitrage," using current low costs to gain higher returns in the future.
2. Extreme Imbalance in Global Inventory: Surplus in the US, Shortage Elsewhere
Tariff arbitrage has led to a severe imbalance in inventory distribution:
- Surging US Inventory: COMEX official inventory has reached a record high, with total inventory potentially breaking a century-old record;
- Emergency Situations Elsewhere: LME (London Metal Exchange) deliverable inventory is down to just 94,000 tons (only enough for one day's global consumption), and Shanghai Futures Exchange inventory has dropped from 430,000 tons in March to 69,000 tons.
A more obvious sign of the imbalance is the "spot premium" (reverse price difference): LME near-month contracts are $105 per ton more expensive than March contracts (the widest gap since January), indicating a severe shortage of spot copper globally.
3. Supply Issues: Major Copper Producers Facing Their Worst Performance in 16 Years
Global copper supply is already tight, and recent events have made it even worse:
- Chile (accounting for one-quarter of global production) saw a 7.7% decline in copper output in the second quarter, the worst since 2007;
- Mining companies worldwide are facing challenges such as aging mines and difficulties in building new ones: increasing costs for mining operations and slow progress due to environmental regulations and policies.
This means that copper supply may not keep up with future demand growth—similar to a factory having insufficient capacity while receiving more orders, leading to naturally rising prices.
4. Boosting Demand from AI and Energy Transition
Copper is an essential material in industry, and there are two new major sources of growing demand:
- AI Data Centers: Data centers require large amounts of copper (servers, cables, backup power, etc.). The International Energy Agency predicts that data center electricity consumption will double by 2030, driving up copper demand;
- Energy Transition: Electric vehicles, solar energy, and wind power all rely on copper (for example, an electric vehicle uses three times more copper than a fuel-powered car). Standard & Poor's predicts that copper demand will increase from 28 million tons in 2025 to 42 million tons by 2040 (a 50% increase). If supply does not keep up, the gap could reach 10 million tons.
In simple terms, both AI and green energy rely on copper, and demand is only set to grow.
5. What Do Institutions Think? Copper Prices Could Reach $15,000, but Tariffs Are a Double-Edged Sword
Many institutions are optimistic about copper prices but consider tariffs as a key factor:
- Citibank: LME copper could challenge the $15,000 level in the next 6-12 months due to insufficient supply flexibility, growing demand from AI and energy transition, and tariff negotiations;
- JPMorgan Chase: If tariffs are implemented and cause extreme shortages, LME copper prices could surge to $15,000; otherwise, prices would fall significantly.
In summary, the implementation of tariffs would drive up copper prices, while their failure would lead to a decline—this is the key factor determining future price trends.
In One Sentence
The rise in copper prices is the result of a combination of tight supply, strong demand, and tariff arbitrage. Whether prices can continue to rise depends on whether the US imposes tariffs. For the general public, it means that copper is currently in high demand, but whether this demand will persist depends on US policies.