The surge towards computing power has now ignited a frenzy in copper, with the metal being dubbed the "compute metal" for the AI era. How much longer can copper prices continue their dramatic ascent?
"I anticipated copper prices would rise due to mine closures, earthquakes, mudslides, and strikes... a series of unexpected events at major global copper mines in recent years. But I never expected such a ferocious rally," remarked a copper concentrate trader.
In mid-May this year, copper prices on the London Metal Exchange (LME) hit a historic peak of $14,153 per ton. The main copper contract on the Shanghai Futures Exchange also reached a record high of 108,900 yuan per ton. Looking back, LME copper prices had plunged to a cyclical low of $4,867 per ton in 2016. A decade later, prices are nearly triple that low point.
However, June brought a downward correction, with spot prices falling to 101,080 yuan per ton and the main Shanghai copper contract retracing to around the 105,000 yuan per ton level, offering some breathing room for mid- and downstream companies. Is this a temporary sentiment-driven cooldown, or the start of a retreat from a cyclical peak?
Capital markets appear to have sensed this subtle shift. In June, the average share prices of major A-share mining giants Zijin Mining Group Co., Ltd. and China Molybdenum Co., Ltd. fell by 12% and 1.4% respectively compared to May. Jiangxi Copper Company Limited also saw a pullback after a mid-June rally.
Behind this copper price surge lies a compelling industrial narrative: tight supply at the upstream mining level, demand expectations buoyed by the AI computing power story, the "siphoning" of global spot supply by U.S. copper tariffs, and a resource positioning race where "security" trumps "efficiency" amid great power competition. Yet, there's often a gap between macro narratives and micro realities. One trader holding hundreds of tons of copper concentrate sought buyers in an industry WeChat group. While there were inquiries, the cargo remained unsold for days—highlighting the market's current hesitation between sellers holding firm on prices and buyers' willingness to purchase.
According to Jia Yelin, a copper industry expert and deputy general manager of Antaike, the current supply-demand tension in the copper market is concentrated upstream in the mining sector. Downstream metal consumption demand is largely being met, with no widespread shortages yet.
Simultaneously, major domestic and international mining giants like BHP Group Ltd, Zijin Mining Group Co., Ltd., China Molybdenum Co., Ltd., and MMG Limited have all announced expansion plans this year. So, how long can this copper price surge persist?
A New Chapter for an Old Industry
Looking back over two decades, copper price cycles are clearly discernible. From 2005 to 2011, driven by robust demand from industrialization and real estate, prices soared from $3,490 to over $10,000 per ton in a super bull market. However, as China's economic growth shifted gears and traditional industry demand slowed, copper entered a prolonged adjustment phase from 2012 to 2020. Despite a minor rebound between 2017 and 2020, prices barely exceeded $6,000 per ton. Starting in 2021, against a backdrop of global liquidity and rising new energy demand, copper prices began climbing, entering a new acceleration phase in the second half of 2025.
Unlike past cycles, this bull run has a new narrative. Metals like copper, once labeled "cyclical" and "traditional," are now tagged as "compute metals." Analysis from Goldman Sachs shows electrification (grids + new energy vehicles + renewables) will account for 46% of copper consumption by 2026, up from 42% in 2024. Sixty percent of global copper demand growth is projected to come from three "strategic" sectors: power grids, defense, and AI. Specifically, copper consumption for AI data centers is forecast to surge from about 500,000 tons in 2025 to 1.3 million tons by 2028, a 40% compound annual growth rate.
The International Energy Agency (IEA) stated in its World Energy Outlook 2025 that copper is "central to a more electrified energy system," crucial for data center power transformers, wiring, and chip circuits. Unlike battery metals like lithium (where prices have plunged 85%), copper is a "greater cause for concern" for the IEA. Grid expansion is a primary driver of demand, and current project pipelines suggest a potential 30% supply shortfall by 2035.
While demand shows structural growth, copper supply faces turbulence. In November 2023, the Cobre Panama mine was ordered to halt operations due to environmental disputes and remains idle. In September 2025, a severe mudflow accident hit Grasberg in Indonesia, the world's second-largest copper mine operated by Freeport-McMoRan Inc. (FCX). Although phased restarts began this year, capacity is only at 60% of design levels, with full recovery delayed until mid-2027. Consequently, FCX's Q1 copper output plummeted 24% year-on-year. Last year, output at Zijin's Kamoa-Kakula mine in the DRC was also impacted by seismic activity and water inflow. Additionally, output at BHP Group Ltd's Escondida mine fell 15.75% in March due to declining ore grades, while Codelco's El Teniente was affected by a mining accident. Peru faces energy crisis risks for its mines. Goldman Sachs estimates total 2025 copper mine supply forecasts have been revised down by 350,000 tons.
Policy adds another layer of supply disruption. In late 2025, the U.S. imposed a 25% tariff on imported refined copper under Section 232, widening the price gap between COMEX and LME copper and doubling U.S. refined copper imports year-on-year. This "siphoning effect" created a situation of oversupply in the U.S. and shortages elsewhere. Goldman Sachs sharply raised its 2026 U.S. inventory accumulation forecast from 550,000 to 900,000 tons—equivalent to 3.5% of global refined copper output being stored in U.S. warehouses, removed from the LME market balance. The copper market deficit outside the U.S. consequently surged from 60,000 to 640,000 tons.
Furthermore, the U.S. Commerce Department submitted a copper market assessment report on June 30, recommending phased annual tariff increases on previously exempted refined copper: an additional 15% tariff on imported cathode copper starting January 2027, rising to 30% in 2028. If implemented, this could further fragment the global copper market.
The most direct reflection of domestic ore scarcity in China is the continuous decline in processing fees. Domestic copper concentrate TC/RCs fell below -$100 per ton in May, keeping smelters in a loss-making position. Customs data shows China imported 12.28 million tons of copper ore and concentrate from January to May, a 1% volume decrease but a 32.4% increase in value. While import volumes had maintained positive growth since December 2020, April-May saw the first decline in over five years.
Jia Yelin points out that since 2023, a new wave of concentrated smelting capacity expansion and commissioning has occurred domestically and internationally. However, the growth rate of copper concentrate supply from mines has significantly lagged behind smelting capacity expansion, leading to a prolonged tight concentrate market. This has resulted in sustained pressure on smelting fees, with spot treatment charges turning negative after 2025 and worsening progressively.
Operationally, smelters' main products are currently loss-making. While rising revenues from by-products (sulfuric acid, gold, silver, etc.) can partially offset losses, this compensation margin is narrowing. Jia believes if this trend continues, smelters will struggle to maintain normal production.
"This reflects the imbalance and irrationality in value distribution across the entire copper industry chain," Jia stated. "China's overall dependence on imported copper raw materials is about 73%, with dependence on copper concentrate as high as 80%. The短板 in resource endowment has made 'resource control' the core variable determining value distribution power."
The Race for Resource Positioning Among Giants
Whoever holds copper-producing mines holds strategic initiative for the next decade. A positioning and expansion race is underway among major economies and top mining giants.
On July 1, Australia-based mining giant BHP Group Ltd formally changed leadership, with former Americas president Brandon Craig succeeding Mike Henry as CEO. The day after taking office, BHP Group Ltd announced it had submitted an environmental impact study to Chile to restart the Cerro Colorado copper project, planning a $1.5 billion investment to extend the mine's life by 20 years.
Notably, BHP Group Ltd's copper output grew 8% in 2025, with a cumulative increase of about 30% over the past four years. Its H1 2026 financial report showed copper business gross profit accounted for 51% of total profit, historically surpassing iron ore for the first time. Previously, BHP Group Ltd had sought to increase its copper bet by acquiring Anglo American, but its offers were repeatedly rejected. According to The Economist, Craig expressed a desire for BHP Group Ltd to be "more creative" in its growth approach, emphasizing possibilities for more partnerships and smaller acquisitions.
China's leading copper miners have also unveiled expansion plans. In 2025, copper in concentrate production for Zijin Mining Group Co., Ltd., China Molybdenum Co., Ltd., MMG Limited, and Jiangxi Copper Company Limited was 1.09 million tons, 740,000 tons, 507,000 tons, and approximately 200,000 tons respectively. Zijin Mining Group Co., Ltd., which also completed a leadership change this year, announced ambitious targets: 1.2 million tons of copper in concentrate for 2026, reaching 1.5-1.6 million tons by 2028, aiming for a top-three global position in copper production. New Chairman Zou Laichang stated, "The company has explicitly added a 'production increase' dimension to its growth strategy to fully seize the current market opportunity of high metal prices."
China Molybdenum Co., Ltd. targets 760,000-820,000 tons of copper in concentrate for 2026. Its Phase II KFM project in Africa is scheduled for completion in 2027, expected to add 100,000 tons of copper metal annually. MMG Limited expects copper output to grow to 528,000 tons in 2026. Its $900 million Khoemacau copper mine in Botswana commenced construction in February, aiming to increase annual copper production from over 40,000 tons to 130,000 tons.
Based on the expansion plans of these three leading Chinese miners, their combined copper output could exceed 3.5 million tons by 2028, raising China's share of global output from 10% to over 20%. Concurrently, China's refined copper production of 14.72 million tons accounts for over half of global output, dominating the refining segment. This signifies China is building a closed-loop industrial chain from overseas equity mines to domestic smelting and finally to new energy/AI end-demand—trading mergers and acquisitions for time, capacity for security, and industrial chain depth for influence.
Unlike China's market-driven strategies of investment and expansion, the U.S. has chosen a different path in this resource race. First, by creating price differentials through tariffs, it has triggered a redistribution of global copper inventories. On May 22, trader Trafigura canceled warrants for 51,000 tons of copper from LME warehouses, valued at over $700 million at approximately $13,600 per ton. Second, the U.S. is also restarting domestic copper mining capacity. In February, a BHP Group Ltd-Rio Tinto Ltd joint venture began exploring restarting the San Manuel copper mine in Arizona, bringing this long-dormant former largest underground U.S. copper mine back into view, though land swaps and formal commissioning will take time.
When the Narrative Falls Short of Expectations
Amidst major investments in restarts and expansions, copper prices cooled in June, shifting from a one-way breakout to high-level consolidation, with an unexpectedly sharp decline at month-end.
More surprising to markets was the July 1 announcement by Meta that it was building a cloud computing business to sell AI computing power externally. The news triggered a broad sell-off in global memory and computing power leasing stocks. This undoubtedly poured cold water on the hot "compute metal" narrative, suggesting the pace and form of data center expansion may differ from prior optimistic expectations.
From an end-consumption perspective, Jia Yelin believes the current copper market is in a state of "tight ore supply and relatively tight balance for metal." There is no significant shortage of copper products yet. However, he cautions about closely monitoring potential disruptions from U.S. tariff hikes, which could cause regional supply imbalances. For demand growth, AI, computing power, and new energy remain key drivers, but their small base makes it difficult to generate explosive copper consumption growth in the short term.
Song Hongxiao, a copper market analyst at SCI, shares similar observations. He notes that while supply-side expectations remain tight, it is currently a demand off-season. More importantly, the previously bullish narrative of copper as a key raw material for emerging industries is weakening, creating doubt about future price trends and suggesting a lack of support for sustained upward momentum.
"The market is less pessimistic about supply than before, and less optimistic about demand than before," Song remarked.
However, Song also stated that although historically high prices have somewhat suppressed downstream procurement, with the traditional peak season of "Golden September and Silver October" approaching, previously pent-up demand is expected to be released later, leading to seasonal demand improvement that should provide a floor for prices. Overall, he judges that copper prices will likely consolidate and find a bottom around 100,000 yuan per ton in the short term, with limited room for further deep declines. From a medium-term perspective, long-cycle supply constraints and structural demand growth will continue to underpin copper prices, offering room for recovery and upward movement after short-term negatives are absorbed.
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