Copper prices have experienced a dramatic reversal, falling to a three-week low below $14,000 per ton as rising London Metal Exchange inventories eased supply tightness and a stronger dollar pressured industrial metals. According to The Economic Times, three-month LME copper was down 1.6% at $14,005.50 per ton after touching $13,958, its lowest since August 20. The metal has now fallen 6.2% from the record high reached last Thursday, when prices briefly appeared on course to test the $15,000 mark. The decline comes after copper prices fell 0.3% to $14,193 per ton on the London Metal Exchange, following their first weekly decline since June, as reported by Business Standard. Silver dropped 6.1% to $64.455 while gold fell 2.1% to $4,365.40 per ounce, with the precious metal trading near the $4,400 range where it has been pinned for most of September. However, economist Steve Hanke from Johns Hopkins University remains bullish, having recommended staying long on copper just six days before the rally stalled, citing Morgan Stanley's report that this year could mark the first annual decline in copper mine supply since 2017.
The copper supply crisis has intensified significantly, with global mine output falling 1.1% in the first half of 2026 according to International Copper Study Group data. Freeport-McMoRan's Grasberg mine in Indonesia continues running at roughly half capacity after a fatal landslide, with full output not expected before early 2028. The company has cut its 2026 copper guidance from 1 billion pounds to 700 million pounds. Chile has trimmed its national production forecast by 2.6% for a second consecutive quarter, while average ore grades have deteriorated from around 1.6% in 1990 to below 0.6% at many major mines, forcing producers to move more rock for less copper. Despite these operational challenges, copper peaked at $6.92 on August 6 and has since formed what appears to be a triple top pattern, breaking below $6.53 and testing support near $6.29. Charts show copper is not yet oversold with RSI near 42, suggesting potential for further downside toward $5.90.
While supply constraints tighten, artificial intelligence is creating unprecedented demand for copper. A megawatt of data-center capacity requires 60 to 75 tons of metal, much of it copper, with analysts estimating AI facilities alone could add roughly 475,000 tons of demand this year. This creates a complex supply-demand equation that explains the current price volatility. Morgan Stanley expects a 600,000-ton deficit, while JPMorgan sees 330,000 tons and the ICSG puts the gap closer to 150,000 tons. However, Goldman Sachs argues the rally may have moved too far and warns manufacturers could switch toward aluminum if copper remains expensive. The supply-demand imbalance is further complicated by Washington's decision to delay a tariff decision on refined copper imports, sending metal back into LME warehouses and adding downward pressure on prices.
China's steel sector is experiencing severe profitability challenges, with only around 8% of Chinese mills profitable, down from roughly 30% a week earlier and 60% a year ago. According to industry data, the reading represents the weakest level since September 2024, with persistently elevated coke prices continuing to erode margins across the sector. China's leading industry association has reportedly called on steelmakers to voluntarily curb output with the aim of reducing inventories and restoring profitability after a challenging first half. However, analysts see limited willingness among mills to implement substantial production cuts, particularly as steel demand shows signs of stabilizing. Despite the weak fundamentals, investors expect consumption to receive a seasonal boost during September's peak construction period.
The long-term outlook for the metal sector remains encouraging, supported by India's infrastructure expansion, electrification, renewable energy, EVs, data centers, and rising power demand. However, recent market volatility highlights the sector's sensitivity to policy changes and tariff uncertainties, while China's steel sector challenges add another layer of complexity. As reported by The Financial Express, investors should focus on expanding margins rather than just revenue growth, as rising margins indicate better cost efficiency, stronger pricing power, improved product mix, or higher capacity utilization. The current selloff, while significant, comes after the sector's best month on record, suggesting that strong fundamentals may provide support during market corrections. According to Mining.com, Morgan Stanley now sees mine supply flat to slightly lower, which would make 2026 the first year of falling mine output since 2017, with the project pipeline unlikely to add much before 2030. However, the supply-demand imbalance created by AI data centers and the current mine supply constraints suggests potential for price recovery once market sentiment stabilizes.
