According to an industry report, copper is becoming increasingly strategic for governments and industries as artificial intelligence (AI), power grid investment, and defense spending drive up demand for the industrial metal, and its performance this year has significantly outpaced gold, which has shone brightly in recent years.
Currently, the LME copper price is oscillating in a narrow high range around $14,400 per tonne, quoted at $14,350.88 at the time of writing.
But the calm on the surface masks a steep upward curve during the year: copper has gained 15.8% year-to-date, and over the past 12 months the increase exceeds 30%.
By contrast, gold futures have fallen 4.11% year-to-date and 4.52% over the past 12 months. Spot gold has declined 4.89% over the past 12 months and 4% year-to-date. An asset long regarded as a "cyclical industrial metal" has systematically overwhelmed the traditional safe-haven asset in terms of returns.
This inversion is not an accidental asset rotation, but a clear signal that copper's pricing anchor is shifting from the inventory cycle toward geopolitics and structural demand.
A Metal Being Redefined: From "Economic Barometer" to "Strategic Infrastructure"
Copper's traditional analytical framework is built on construction starts, manufacturing output, and the inventory cycle. Under this framework, copper prices are a thermometer of economic activity, and their rises and falls are seen as a mapping of aggregate demand.
However, the copper market in 2026 presents a paradox that the traditional framework struggles to explain: the global refined copper market was once in a phase of temporary surplus in the first quarter, with the International Copper Study Group (ICSG) estimating a surplus of about 396,000 tonnes, yet prices hit a record high.
The coexistence of aggregate surplus and record-high prices points to a clear conclusion: copper's marginal pricing power has shifted from aggregate supply and demand to regional allocation and strategic expectations.
Ivanhoe Electric CEO Taylor Melvin said in an interview during LME Week, the annual flagship event of the global metals industry: "We are now in a world where those varieties that have long been called critical metals are evolving into strategic metals across the board."
Currently, the focus of governments and industries on copper has shifted from "whether the price is cheap" to "whether supply is reliable." The United States has included copper on its critical minerals list; Congolese copper officially entered the U.S. strategic minerals reserve in mid-October; and Swiss commodities trader Mercuria delivered the first 12,000 tonnes of Congolese copper to the "Vault Plan" 鈥?all of these are operational implementations of this logic.
Copper's strategic attribute no longer stays in research report headlines, but directly intervenes in the tradable volume of the spot market in the form of geographical migration of inventories and the construction of reserve systems.
The "Inelastic" Characteristics of the Demand Structure
What also supports copper prices at high levels amid fluctuations in macroeconomic sentiment is a set of demand that is difficult to adjust through price signals in the short term.
First is the AI computing infrastructure that has long been at the center of capital market discussion. Speaking about the technology industry's demand for copper in the interview, Melvin said AI "is a new area of demand, and for copper it is almost rigid demand."
He added that when tech giants decide whether to build hyperscale data centers, the cost of copper carries extremely low weight in their capital expenditure decisions, which makes the technology industry's demand for copper "nearly inelastic."
In other words, even if AI stock valuations fluctuate sharply due to financing conditions or the pace of monetization, copper purchases for data centers already in the construction cycle will not be canceled accordingly.
"It is hard to imagine any one of these large tech companies deciding whether to invest in a hyperscale data center based on the cost of copper," Melvin said.
Second, copper is also the largest source of demand for power grid modernization and electrification. According to statistics, the power sector firmly ranks as the largest copper consumption segment with a share of more than 40%, and ultra-high-voltage construction, renewable energy grid connection, and distribution network upgrades together form a sustained demand base.
BNEF forecasts that copper demand related to electrification will jump to 23.3 million tonnes by 2050, an increase of 89% from the current level, accounting for more than half of total consumption.
The institution's analysts wrote: "Electric mobility is the fastest-growing area of copper applications. The penetration of electric cars, electric trucks, and electric buses will rise sharply between 2026 and 2050, and their motors, inverters, battery packs, high-voltage wiring harnesses, and charging facilities all require copper."
In addition, the structural expansion of defense spending has also become a new area of rigid copper demand. Melvin said: "Another rising demand area that also has rigid characteristics is national security and defense budgets."
Steve Schoffstall, managing partner and head of ETFs at Sprott Asset Management, once pointed out that global defense budgets exceed $2.6 trillion, NATO aims to spend 5% of GDP on defense, and defense-related copper is expected to expand at an annual growth rate of about 7%.
It is worth noting that, unlike AI demand, defense procurement is driven by security agendas and has extremely low sensitivity to price signals.
The simultaneous existence of these three demand drivers at high prices explains why copper prices have not fallen back under the drag of traditional cyclical forces.
BNEF's estimates also provide a long-term anchor for this judgment: without about $332 billion in new mine investment, the copper market will face a supply gap of 20 million tonnes by 2050; even if investment is in place, a new copper mine takes an average of 17 years from discovery to production, and the gap may not narrow systematically until at least 2043.
This means that the rigidity on the supply side is not a one- or two-year issue, but a structural constraint measured in decades.
Suspended Tariffs and Inventory Siphon: A Self-Reinforcing Supply Tightness Mechanism
If the demand structure provides the "bottom support" for copper prices, then uncertainty over U.S. refined copper tariffs acts as an amplifier of short-term price elasticity.
It is understood that the U.S. Department of Commerce recommended in 2025 a 15% tariff on refined copper starting January 1, 2027, rising further to 30% in 2028. But no final decision on the proposed tariff has yet been publicly announced.
"Suspense" itself, rather than any announced policy, has become a substantive variable in market operation.
The reason this tariff policy affects copper price trends is that traders, based on expectations that the 2027 tariff will take effect, accelerated shipments of refined copper to the United States before the window closes.
According to statistics, COMEX copper inventories soared from about 84,000 tonnes in February 2025 to more than 650,000 tonnes in early August 2026, setting a century record since COMEX began complete statistics; total copper stockpiling within the United States is widely estimated to have far exceeded 1 million tonnes.
Goldman Sachs sharply raised its forecast for U.S. copper inventory accumulation in 2026 from 550,000 tonnes to 900,000 tonnes in June, and subsequently pointed out that the copper supply gap outside the United States had widened from a previously forecast 640,000 tonnes to about 950,000 tonnes.
The geographical migration of inventories has created an asymmetric shortage. At the aggregate level, global copper has not disappeared; but at the tradable level, visible inventories in non-U.S. markets have been systematically thinned.
According to analysis, LME inventories fell from a phased high of about 400,000 tonnes in April 2026 to about 250,000 tonnes, SHFE copper inventories plunged from 359,100 tonnes at the end of March to 47,100 tonnes in late September, and domestic social inventories once touched a recent low of 78,300 tonnes.
Analysis points out that even if the recent COMEX-LME spread retreats as the near-month arbitrage window narrows, as long as the expectation of escalating tariffs in 2027-2028 is not formally revoked, the structural incentive for traders to ship copper to the United States in advance will always exist.
The U.S. government does not need to directly allocate funds to build reserves; merely by maintaining tariff expectations, it can continuously draw global copper resources into its own inventories, turning private commercial inventories into a de facto "quasi-strategic reserve."
Before the tariff is officially implemented or clearly canceled, this mechanism will continue to provide copper prices with a risk premium generated by policy uncertainty itself.
"Because of the potential U.S. tariff, a very large part of the world's copper is currently stored in the United States, and it is unclear whether those inventories will be supplied to the rest of the market," said Iain Pyle, senior investment director at Aberdeen Investments and co-manager of the abrdn Future Minerals Fund.
"At the same time, Chinese inventories look unusually low, and local premiums are rising," Pyle added.
In an October 15 report, Pyle also called copper "the most obvious example" of a market where supply cannot keep up with demand, and said "sustained higher copper prices are needed to provide stronger incentives."
"There is still some pullback risk around tariff announcements, but we believe the fundamentals are clearly bullish, and the possibility of a sharp price spike has increased."
At the Moment of AI Valuation Pullback, Copper's "Decoupling" Logic
A background that cannot be avoided in copper price analysis is that global AI-related stocks are undergoing a significant valuation contraction.
In the week ended October 16, the Nasdaq 100 fell about 5.5% for the week, the largest weekly decline since April 2025; the Philadelphia Semiconductor Index fell for eight consecutive trading days, retreating about 11.5% for the week and directly entering correction territory.
Nvidia (NVDA.US) has pulled back more than 10% from its phased high on October 6; CoreWeave (CRWV.US) plunged more than 25% in a single week, its 2031 bond yield once touched 16%, and its five-year CDS spread exceeded 1,100 basis points, with the implied default probability in market pricing rising significantly.
The driver of the selloff is not a falsification of AI computing demand, but tighter financing conditions and a repricing of the pace of commercialization: some AI infrastructure companies rely on high-interest debt to support expansion, and when revenue growth cannot cover interest expenses, the fragility of the credit structure is exposed in concentrated form.
It is against this backdrop that a logical divergence between copper and AI stocks has emerged that deserves serious attention.
AI stock valuations price the discounting of future cash flows and are highly sensitive to interest rates, financing costs, and the competitive landscape; copper's position in the AI demand chain, by contrast, is as a raw material input in the physical construction phase.
GPU clusters in data centers can delay orders, but the copper required for already-designed power connections, cooling systems, and busways has a far more rigid procurement timetable.
Ivanhoe Electric's Melvin stressed: "Tech sector valuations have indeed seen some pullback recently. But two things can be true at the same time: stock sentiment in capital markets will fluctuate; at the same time, the related industry itself is still growing, which will continue to bring incremental demand for copper."
Moreover, copper's demand narrative does not rely on AI as its only pillar. Grid upgrades and defense spending form two independent demand curves with very low correlation to the AI capital cycle.
Even if the pace of AI data center construction slows temporarily, the renewal cycle of power infrastructure and multi-year defense procurement contracts will still provide bottom support for copper consumption.
In fact, in BNEF's long-term outlook, data centers are explicitly described as "a drop in the ocean" of copper demand, while electrified transport is the fastest-growing application scenario.
This means that viewing copper as an "AI concept asset" is inaccurate; copper's bullish logic is not built on AI valuations, but on the broader foundation of electrification, security, and supply chain regionalization.
Goldman Sachs recently raised its end-2026 LME copper price target from $13,735 per tonne to $14,700 per tonne, an increase of about 7%, with the rationale explicitly pointing to "increasingly fierce competition between the United States and China for copper resources" and mine supply weaker than expected.
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