Copper market shortage warning! Trump's tax hikes, mine closures, and AI copper consumption surge could push copper prices higher.
2025-09-08 21:45:47
LME copper prices rose slightly in the European session on Monday (September 8), supported by a weaker US dollar, outflows from London Metal Exchange (LME) registered warehouses, and expectations of stronger import demand from various countries this month. Copper prices have now fallen slightly to $9,896 per ton, having risen 1% to $10,008 per ton on Friday.
Copper (COMEX) is at the heart of the most volatile industrial metals market in decades, with technological narratives, demand from major countries, policy orientations, production-side disturbances and institutional position adjustments all intertwined to drive price trends.
According to institutional statistics, the annual copper demand for newly built AI data centers alone is expected to reach an average of about 400,000 tons in the next ten years, with the peak demand reaching about 572,000 tons in 2028; if the cycle is extended to 2035, the cumulative copper consumption in this field will exceed 4.3 million tons.
This scale of demand, coupled with the use of copper in power transmission, wind power, solar power generation and electric vehicles (EVs), has led to an accelerated increase in global copper demand in the context of energy transition.
However, the expansion progress on the supply side is lagging significantly: even taking into account the expansion plans of existing mines, global copper production is expected to reach only about 29 million tons by 2035, while demand may climb to 35 million tons during the same period, and the supply-demand gap will be as high as 6 million tons.
For institutional investors, data center operators and policymakers, the AI-driven increase in electricity demand, combined with years of underinvestment in the mining sector, means the copper market may be in a long-term shortage in the future.
Goldman Sachs has raised its baseline tariff forecast to 50% after U.S. Commerce Secretary Howard Lutnick confirmed the official conclusion of the Section 232 investigation into copper, clearing the way for the measures to be implemented by the end of summer. This tight timeframe has prompted exporters to accelerate shipments to the U.S. market to avoid the cost impact of the tariffs once they take effect.
Copper futures on the New York Mercantile Exchange (COMEX) surged to $13,000 a metric ton after U.S. President Donald Trump announced a 50% tariff on imported copper, double Wall Street's previous expectation of a 25% benchmark tariff.
This policy impact directly led to a significant arbitrage spread between COMEX and London Metal Exchange (LME) contracts, sparking unprecedented discussion about copper. Currently, London copper prices hover at $9,700 per metric ton, significantly below COMEX quotes. This gap suggests a significant increase in the risk of pricing misalignment between exchanges.
At the same time, after the tariff news was announced, the share price of Freeport-McMoRan (FCX), the world's largest listed copper mining company, rose by more than 2.5%, reflecting the market's short-term optimistic expectations for upstream mining companies.
The US government's strategic logic behind this policy is clear: to ensure the security of the domestic copper supply chain in key areas such as automotive manufacturing, defense and military industry, and power grid upgrades.
However, from the perspective of market impact, this move will have a two-way effect - in the short term, it will cause downstream industries to face copper supply shortages, while at the same time pushing copper raw material prices into a structural upward channel.
While US tariffs dominate market headlines, pressure on the copper supply side cannot be ignored. Capstone Mining (CSCCF) announced that its Manto Verde mine in Chile experienced a mechanical failure in late August, with two ball mill drive motors failing simultaneously.
The repair work is expected to take four weeks, during which the mine's production capacity will be halved. However, the market reaction to this short-term negative news has been limited: Capstone Mining's stock price has still risen 23% year-to-date, with a further 14% increase over the past month. This is primarily due to investors focusing on the company's long-term growth strategy. Analysts believe the stock is still undervalued by 10.7%, with a fair price estimate of $11.10 per share. This is primarily driven by the Mantowede Optimization Project, which, upon commissioning, is expected to significantly increase the mine's processing capacity and expand unit profit margins.
It should be noted that the continued drought in Arizona, the United States and sudden operational problems remain key risks that may undermine this optimistic logic.
Ero Copper (ERO) has been in the spotlight recently due to changes in institutional holdings: 683 Capital Management has reduced its stake by 27.1%, bringing its holdings down to 1.8 million shares, with a market value of approximately $21.8 million.
However, judging from the overall holding structure, the company's institutional shareholding ratio is still as high as 71.3%. This data highlights that the market's overall confidence in its fundamentals has not changed.
Specifically, institutional holdings show a "bull-short divergence": hedge funds such as Decade Renewable Partners LP have increased their holdings by over 61%, while GMT Capital Corp. has increased its holdings by 22.9%, with its latest holdings exceeding 6.9 million shares. This "bull-short divergence" refers to a disagreement over the extent of an increase in holdings, not an increase in holdings.
In terms of analyst ratings, the current consensus rating is "Moderate Buy" with an average target price of $23.50, significantly higher than its latest trading price of $14.97.
Judging from the fundamental data, Yilu Copper's recent financial report showed the differentiated characteristics of "profit exceeding expectations, revenue falling short of expectations": earnings per share (EPS) was US$0.46, exceeding market expectations of US$0.33; but revenue was US$163.5 million, failing to meet market expectations. However, the short-term fundamentals will not change the behavior of institutional allocations.
Import demand from top consumer China also supported the market, with Yangshan copper premiums rising 1.8% to $58 a tonne, a three-month high. The yuan hit a one-week high against the dollar, making dollar-priced metal more attractive to Chinese buyers.
China's unwrought copper imports fell to 425,000 tons in August from July, but increased from the same period last year; copper concentrate imports climbed to 2.76 million tons, a four-month high.
"While low treatment fees have suppressed smelting profits, they have not effectively curbed China's import demand for copper concentrate," ANZ analysts said in a report. "Favourable import parity and the prospect of weakening domestic production should keep refined copper imports strong in September."
LME copper has currently broken through the triangle consolidation pattern and completed a retracement. If it develops upward, the first pressure level for copper prices will be US$10,008 on September 5, which was the highest point of yesterday's high-rise and fall trend. If it breaks through successfully, it is expected to touch the triangle consolidation measurement increase position of 10,221, which is a 15-month high, thus having a chance to challenge the historical high of 11,104.
If the support develops downward, we will first look at the intersection of the 9800 integer level and the upper edge of the triangle.
From the AI technology narrative's surge in copper usage, to the Trump administration's proposed 50% import tariff disturbance, to the suspension of production at Capstone Minerals' Mantoverde mine, to changes in EroCopper insider holdings, and finally to the verification of imports from major countries, the current copper price is not only capable of record-breaking fluctuations around the $13,000/metric ton mark, but may also experience a step-by-step rise in the future.
(LME copper daily chart)
At 19:51 Beijing time, LME copper was trading at $9,897 per metric ton.
Copper (COMEX) is at the heart of the most volatile industrial metals market in decades, with technological narratives, demand from major countries, policy orientations, production-side disturbances and institutional position adjustments all intertwined to drive price trends.
Copper demand in AI data centers continues to rise. Amid energy transition, the global copper market faces a significant supply-demand gap.
According to institutional statistics, the annual copper demand for newly built AI data centers alone is expected to reach an average of about 400,000 tons in the next ten years, with the peak demand reaching about 572,000 tons in 2028; if the cycle is extended to 2035, the cumulative copper consumption in this field will exceed 4.3 million tons.
This scale of demand, coupled with the use of copper in power transmission, wind power, solar power generation and electric vehicles (EVs), has led to an accelerated increase in global copper demand in the context of energy transition.
However, the expansion progress on the supply side is lagging significantly: even taking into account the expansion plans of existing mines, global copper production is expected to reach only about 29 million tons by 2035, while demand may climb to 35 million tons during the same period, and the supply-demand gap will be as high as 6 million tons.
For institutional investors, data center operators and policymakers, the AI-driven increase in electricity demand, combined with years of underinvestment in the mining sector, means the copper market may be in a long-term shortage in the future.
Tariffs reshape U.S. copper trade flows, boosting prices
Goldman Sachs has raised its baseline tariff forecast to 50% after U.S. Commerce Secretary Howard Lutnick confirmed the official conclusion of the Section 232 investigation into copper, clearing the way for the measures to be implemented by the end of summer. This tight timeframe has prompted exporters to accelerate shipments to the U.S. market to avoid the cost impact of the tariffs once they take effect.
Copper futures on the New York Mercantile Exchange (COMEX) surged to $13,000 a metric ton after U.S. President Donald Trump announced a 50% tariff on imported copper, double Wall Street's previous expectation of a 25% benchmark tariff.
This policy impact directly led to a significant arbitrage spread between COMEX and London Metal Exchange (LME) contracts, sparking unprecedented discussion about copper. Currently, London copper prices hover at $9,700 per metric ton, significantly below COMEX quotes. This gap suggests a significant increase in the risk of pricing misalignment between exchanges.
At the same time, after the tariff news was announced, the share price of Freeport-McMoRan (FCX), the world's largest listed copper mining company, rose by more than 2.5%, reflecting the market's short-term optimistic expectations for upstream mining companies.
The US government's strategic logic behind this policy is clear: to ensure the security of the domestic copper supply chain in key areas such as automotive manufacturing, defense and military industry, and power grid upgrades.
However, from the perspective of market impact, this move will have a two-way effect - in the short term, it will cause downstream industries to face copper supply shortages, while at the same time pushing copper raw material prices into a structural upward channel.
Mining giants halt production, curbing upstream copper supply
While US tariffs dominate market headlines, pressure on the copper supply side cannot be ignored. Capstone Mining (CSCCF) announced that its Manto Verde mine in Chile experienced a mechanical failure in late August, with two ball mill drive motors failing simultaneously.
The repair work is expected to take four weeks, during which the mine's production capacity will be halved. However, the market reaction to this short-term negative news has been limited: Capstone Mining's stock price has still risen 23% year-to-date, with a further 14% increase over the past month. This is primarily due to investors focusing on the company's long-term growth strategy. Analysts believe the stock is still undervalued by 10.7%, with a fair price estimate of $11.10 per share. This is primarily driven by the Mantowede Optimization Project, which, upon commissioning, is expected to significantly increase the mine's processing capacity and expand unit profit margins.
It should be noted that the continued drought in Arizona, the United States and sudden operational problems remain key risks that may undermine this optimistic logic.
Institutions rushed into the market, optimistic about the future development of copper prices
Ero Copper (ERO) has been in the spotlight recently due to changes in institutional holdings: 683 Capital Management has reduced its stake by 27.1%, bringing its holdings down to 1.8 million shares, with a market value of approximately $21.8 million.
However, judging from the overall holding structure, the company's institutional shareholding ratio is still as high as 71.3%. This data highlights that the market's overall confidence in its fundamentals has not changed.
Specifically, institutional holdings show a "bull-short divergence": hedge funds such as Decade Renewable Partners LP have increased their holdings by over 61%, while GMT Capital Corp. has increased its holdings by 22.9%, with its latest holdings exceeding 6.9 million shares. This "bull-short divergence" refers to a disagreement over the extent of an increase in holdings, not an increase in holdings.
In terms of analyst ratings, the current consensus rating is "Moderate Buy" with an average target price of $23.50, significantly higher than its latest trading price of $14.97.
Judging from the fundamental data, Yilu Copper's recent financial report showed the differentiated characteristics of "profit exceeding expectations, revenue falling short of expectations": earnings per share (EPS) was US$0.46, exceeding market expectations of US$0.33; but revenue was US$163.5 million, failing to meet market expectations. However, the short-term fundamentals will not change the behavior of institutional allocations.
China, a major consumer, demonstrates the demand for copper
Import demand from top consumer China also supported the market, with Yangshan copper premiums rising 1.8% to $58 a tonne, a three-month high. The yuan hit a one-week high against the dollar, making dollar-priced metal more attractive to Chinese buyers.
China's unwrought copper imports fell to 425,000 tons in August from July, but increased from the same period last year; copper concentrate imports climbed to 2.76 million tons, a four-month high.
"While low treatment fees have suppressed smelting profits, they have not effectively curbed China's import demand for copper concentrate," ANZ analysts said in a report. "Favourable import parity and the prospect of weakening domestic production should keep refined copper imports strong in September."
Summarize:
LME copper has currently broken through the triangle consolidation pattern and completed a retracement. If it develops upward, the first pressure level for copper prices will be US$10,008 on September 5, which was the highest point of yesterday's high-rise and fall trend. If it breaks through successfully, it is expected to touch the triangle consolidation measurement increase position of 10,221, which is a 15-month high, thus having a chance to challenge the historical high of 11,104.
If the support develops downward, we will first look at the intersection of the 9800 integer level and the upper edge of the triangle.
From the AI technology narrative's surge in copper usage, to the Trump administration's proposed 50% import tariff disturbance, to the suspension of production at Capstone Minerals' Mantoverde mine, to changes in EroCopper insider holdings, and finally to the verification of imports from major countries, the current copper price is not only capable of record-breaking fluctuations around the $13,000/metric ton mark, but may also experience a step-by-step rise in the future.
(LME copper daily chart)
At 19:51 Beijing time, LME copper was trading at $9,897 per metric ton.
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- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
