Copper prices are holding steady near record highs as the latest surge approaches the $15,000-per-ton threshold, prompting investors to weigh potential headwinds on the horizon. London Metal Exchange (LME) copper is on pace for an 11th consecutive weekly gain, a rally largely driven by hundreds of thousands of tons of the metal being diverted to the United States, which has tightened supply in other regions.
A softer U.S. dollar and growing optimism around data center demand prospects have also provided additional support for copper prices. However, analysts are beginning to caution that this upward trajectory may prove difficult to sustain, as several of the driving forces appear fragile. Meanwhile, the broader base metals complex faces the risk of a potential hawkish shift from the Federal Reserve.
Traders are now awaiting Friday's U.S. inflation data, which could reinforce expectations for further interest rate increases. "We highlight the risk of a bubble," wrote Natixis analyst Bernard Dahdah in a research note, pointing out that "current prices are primarily driven by U.S. import arbitrage opportunities and hot money flows, rather than by fundamentals and end-user demand."
Copper has long been one of the most favored commodities among analysts, who argue that higher prices are essential to incentivize new mine investments and meet the rapidly growing demand from sectors such as artificial intelligence and renewable energy. Year-to-date gains for copper are approaching 20%, fueled by trade distortions stemming from potential U.S. tariffs.
In Dahdah's view, the market faces considerable risks. "If the final decision is to impose no new tariffs, the arbitrage window would close," he wrote in Wednesday's report. "Copper flowing back from the U.S. could put significant pressure on LME prices."
As of 12:34 p.m. Beijing time, LME copper was largely flat at $14,781 per ton. Other metals were broadly lower, with aluminum slipping 0.2% and zinc falling 0.6%.
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