Copper prices have reached a 6-week high driven by supply disruptions and geopolitical tensions, with the three-month contract trading around $13,851 per tonne on the London Metal Exchange, up 1.7% from the previous session. According to reports from The Hindu BusinessLine, the red metal has gained 5% in the past month and over 13% year-to-date, while LME copper prices surged 38% year-on-year in the first quarter, reaching a record high of $14,500 per tonne in January. The Australia's Office of Chief Economist (AOCE) attributes this elevation to ongoing supply disruptions and tight concentrate markets, with prices expected to persist through 2026. Comex copper jumped 3.3% to $6.55 a pound ($14,440 a tonne), bringing it within 2% of June's record high, while the New York premium over London widened to nearly $600 a tonne, more than double Monday's gap, reflecting tariff positioning rather than global supply shortfall.
The copper market faces significant volatility due to US tariff expectations and Commerce Department's review of phased tariffs of 15% from January 2027 and 30% in 2028. As reported by ING commodities strategist Ewa Manthey, copper is being driven higher by a tightening Chinese market but warned the rally will need continued evidence of physical tightness to extend. The White House is weighing these phased tariffs after the Commerce Department's review concluded, driving Comex copper inventories above a record 630,000 tonnes as traders position ahead of potential import duties. However, a delayed or less restrictive ruling could quickly narrow the premium and reduce the incentive to hold the record stockpile. The current rally depends on the nearly $600-a-tonne Comex-LME premium, which more than doubled by July 21 as tariff expectations pulled copper into the US market.
The copper market continues to face multiple supply disruptions that are supporting prices. Deliverable copper stocks on the Shanghai Futures Exchange have collapsed 82% since early May, while LME inventories have fallen 28%, with more than half already queued for withdrawal. Smelter outages have tightened refined copper supply, leaving 16% of global capacity inactive in the second quarter and Chile's idle capacity at 25.4%, the highest since 2019. Record-low treatment charges are forcing permanent smelter closures, including Japan's 354,000-tonne-a-year Onahama smelter, which will stop processing concentrate in early 2027. The LME cash-to-three-month spread has narrowed toward backwardation, signaling sustained physical tightness rather than a one-day price move. Meanwhile, about 20% of world refined copper production uses sulphuric acid in solvent extraction and electrowinning operations, creating supply chain vulnerabilities.
Mining companies are benefiting significantly from the copper rally, with Grupo Mexico's Q2 results showing net profit lifted 79% to $2.20 billion despite a 3.7% decline in output, as higher copper prices more than offset weaker production. The market rewarded this dynamic across the sector, sending Freeport-McMoRan up 6.3%, Southern Copper 6.5%, and Teck Resources 3.7%. Grupo Mexico is reinvesting into future copper supply, raising $1.25 billion in bonds for Peru's Tía María project, now 42% complete and scheduled to begin operating in the second half of 2026. However, concerns over global growth and Fed outlook could limit further gains, with the key near-term risk being the Commerce Department's tariff decision, as a delayed or less restrictive ruling could unwind tariff-driven positioning.
