MW Copper prices are now at their highest level on record. AI is only part of the story.
By Myra P. Saefong
Copper refining now has a Strait of Hormuz problem
Copper futures on Comex settled at a record high of $6.53 a pound on Tuesday.
A pound of copper now costs more than ever before - and there's more to the story than just the artificial-intelligence race.
Sulfuric acid, a critical component in copper refining, has been in shorter supply lately because of the Iran war and shipping disruptions in the Strait of Hormuz. China also has placed restrictions on exports of the chemical - and both of those factors are likely increasing copper's production costs.
"Copper prices stretching to all-time highs is an example of a perfect storm of structural supply-side issues," said John Caruso, senior market strategist at RJO Futures. He said declines in the concentration of copper extracted from rock and supply bottlenecks in the Persian Gulf also have been "colliding head on" with record levels of demand fueled by AI expansion.
Copper prices (HG00) settled at a record high on Tuesday, with the most actively traded July futures contract (HGN26) at $6.53 a pound on Comex. The metal has gained 7.8% since the start of the Iran war, according to Dow Jones Market Data, and is trading about 15% higher year to date.
Many of the paths to refining copper lead back to the Persian Gulf. Sulfur, which is used to produce sulfuric acid, is a byproduct of the oil-refining process. Oil-rich countries such as Iran, Kuwait, Qatar, Saudi Arabia and the U.A.E. produced almost a quarter of the world's supply of sulfur last year, according to a report from the Congressional Research Service, the U.S. Congress's think tank.
Prices for sulfur also recently climbed to record highs - with the Mosaic Company $(MOS)$, which produces sulfuric acid to make phosphate-based fertilizer, reporting prices of more than $1,200 per metric ton in its first-quarter results released Monday. When asked if it had further comment, Mosaic referred back to its first-quarter earnings results and webcast.
In addition to sulfur, roughly half of the world's seaborne supply of sulfuric acid also comes from the Middle East, according to the report from the Congressional Research Service. The chemical is essential in the leaching process of copper, which involves extracting the metal from copper ore.
The Iran war and the effective closure of the Strait of Hormuz to tanker traffic already has lasted longer than many expected. That's raising questions about alternative routes to get sulfuric acid out of the Middle East, said Edward Meir, an analyst at Marex. Given the chemical's acidic and corrosive qualities, it would be difficult to load it onto a truck, he noted.
Contributing to supply-side issues, China started restricting its exports of sulfuric acid in May, according to the Wall Street Journal. Freeport-McMoRan $(FCX)$, which mines copper and other metals, reportedly postponed a restart of its Grasberg mine in Indonesia to early 2028, Meir said. When those reports emerged late last week, they contributed to the rise in copper prices, he added.
Shares of the Global X Copper Miners exchange-traded fund COPX were up for a third session in a row Tuesday, trading up 1.2% at $88.57, while the United States Copper Index Fund CPER, which tracks copper futures' performance, was also up a third straight day, climbing 1.5% to $39.98 in Tuesday dealings.
Freeport didn't immediately respond to a request for comment on its plans for the Grasberg mine's restart, but Reuters reported Monday that the company disputed the reports of delays and still expects the mine to resume full production by the end of 2027.
The rally in the copper market, however, isn't just about escalating supply constraints - it's also being driven by the "collision of durable demand growth," said Jacob White, director of ETF product management at Sprott Asset Management.
AI is clearly part of that demand story, particularly through data centers and the power infrastructure that support them, White told MarketWatch. That's the type of demand that is more resistant to a rise in prices, and less likely to decline because of higher costs, he said.
Read archived story: Why it's time for investors to start treating copper like a precious metal
Even before the supply disruptions, a decline in the grades of ore available, which results in less copper yielded, has been a growing issue, White said. Copper has also faced long development timelines and limits to new mining projects.
High prices for the metal can help boost production and eventually supply, and reduce demand too. But supply has been constrained by "geology, permitting and infrastructure realities" - realities that cannot be resolved in the short term, noted White.
The market is "increasingly signaling that meeting future copper demand will likely require not only higher prices, but coordinated policy action to support faster project development and supply resilience," he said.
Looking ahead, copper likely won't require a new demand surprise to get prices to move higher, White added, as it's proven its significance and value when it comes to contributing to economic growth. That's an environment that remains supportive for copper prices and copper-mining equities through 2026, he said.
-Myra P. Saefong
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May 12, 2026 17:43 ET (21:43 GMT)
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