Copper prices have extended their decline, influenced by the U.S. Federal Reserve's persistently hawkish stance and the continued strength of the U.S. dollar. After falling for two consecutive weeks, London Metal Exchange copper futures briefly dipped toward $13,300 per tonne on Monday, though they later recovered slightly to trade around $13,400 per tonne, up 0.43% at the time of writing. Following a record-high close last month, copper is on track for a monthly decline of over 2% in June.
Federal Reserve policymakers have recently signaled increasing support for interest rate hikes in the coming months to address persistent inflationary pressures in the United States. This stance typically bolsters the U.S. dollar, which in turn weighs on dollar-priced commodities like copper. The U.S. Dollar Index climbed to its highest level since last November earlier this week. Traders suggest that robust U.S. economic data will likely sustain the dollar's strength, continuing to pressure base metal prices.
Data released last Thursday showed the Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, rose 4.1% year-over-year in May, marking the largest increase since April 2023. While conflict in the Middle East has pushed up oil and other commodity prices, the rise in price pressures has become more broad-based.
Richmond Fed President Thomas Barkin stated in an interview on Sunday that the May PCE data was "just too high." He added, "Without the federal funds rate, the labor market, or other factors that would push inflation down continuing to work, it's hard to be confident that inflation will get back to the 2% target."
Minneapolis Fed President Neel Kashkari said on Friday that, due to persistent signs of broad inflation, he had projected one interest rate hike this year in the Fed's economic forecasts released earlier this month. Kashkari noted, "I'm concerned about inflation, and it's not just about the Middle East; more importantly, broader inflationary pressures are building across the economy."
Chicago Fed President Austan Goolsbee similarly indicated that overall U.S. inflation pressures remain too high, with core inflation trends particularly concerning. The Fed, he said, needs to see more signs of improvement before gaining greater confidence in the inflation outlook.
Goldman Sachs, however, argues that the Middle East conflict could ultimately benefit metal demand. Analysts, including Samantha Dart, wrote in a report that increased reliance on electric vehicles, rising investment in renewable energy, expanded defense spending, and intensifying competition in the artificial intelligence race will all be key themes supporting copper demand. Goldman Sachs recently raised its copper price forecast for the end of 2026 to $13,735 per tonne and its average price forecast for 2027 to $13,800 per tonne.
Citigroup has issued an even more bullish forecast. The bank raised its short-term copper price forecast from $13,000 to $14,500 per tonne, with a 6-to-12-month target price of $15,000 per tonne.
Potential trade policies under a future Trump administration could also impact copper prices. Markets anticipate that a Trump administration might impose tariffs on imports of refined metals. However, if this expected tariff policy is not enacted, it could become a bearish factor for copper. The U.S. Department of Commerce must submit a recommendation to the President by June 30 on whether to impose a 15% tariff on refined copper starting next year. Goldman Sachs' base case assumes the U.S. will again postpone imposing any tariffs on refined copper, but the expectation that "tariffs could come at any time" is itself enough to drive sustained stockpiling behavior.
Long-Term Support from Supply-Demand Dynamics
From a medium-to-long-term perspective, copper prices are still expected to find support. On the demand side, copper is widely used in electric vehicle batteries, data centers, and numerous other sectors. Amid the global surge in AI computing infrastructure buildout, data centers are becoming veritable "new copper mines." This traditional industrial metal, with its irreplaceable conductive and thermal properties, is a core material supporting the development of the AI industry. A Morgan Stanley report predicts global data center copper consumption will rise to 740,000 tonnes in 2026, contributing 0.6 percentage points to global copper demand growth. By 2027, data center copper consumption could reach 1 million tonnes (2.8% of total demand), and further increase to 1.3 million tonnes (3.3%) by 2028, representing a compound annual growth rate of 40%.
Jefferies estimated in a previous report that global total copper demand will reach 30.93 million tonnes by 2030, with a compound annual growth rate of 2.1% from 2025 to 2030. Within this, electric vehicles lead with 9.6% growth, while data centers and renewable energy (wind + solar, excluding grid) are projected at 6.1% and 6.7% respectively. The supply side is struggling to keep pace, with global copper supply in 2030 forecast at only 30.09 million tonnes, implying a deficit of approximately 840,000 tonnes. Based on this shortfall, Jefferies' long-term price benchmark is for copper to reach $6.50 per pound, or $14,330 per tonne, by 2030.
Jefferies stated bluntly, "Even in a world with only 2% global GDP growth, the copper market will face a significant supply-demand deficit over the next 12 months and beyond." This indicates that the core driver of this copper price rally is not short-term euphoria fueled by macro sentiment, but a tangible, "physical shortage" on the supply side. The copper market may be moving past its historical cycle of "three years up, two years down" and is more likely entering a period of supply-demand mismatch that could last for several years.
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