According to Hareesh V, Head of Commodity Research at Geojit Financial Services, the rally reflects “an unusual combination of structural demand, acute supply frictions and policy-driven disruptions that have reshaped trade flows.”
What is fueling the rise in copper prices?
1. Policy easing and macroeconomic tailwinds
The US Federal Reserve’s 2025 easing cycle, marked by three consecutive 25 basis point rate cuts, boosted investor risk appetite across asset classes. Hareesh V explains: “Copper hit consecutive records after the December cut as traders see stronger US growth and cheaper financing for capital-intensive industries such as power grids, manufacturing, [and] data centers.”
2. Trade policy arbitrage and stockpiling
Fears of U.S. tariffs on copper created arbitrage opportunities between exchanges, sucking large supplies into U.S. warehouses. This trend led to tightening elsewhere and a premium for COMEX prices versus the LME. “COMEX stocks rose to multi-year highs while LME stocks fell,” Hareesh noted, “disrupting the physical market and pushing LME prices higher despite local comfort in the US.”
3. Supply disruptions at the mine side
The supply side has suffered a series of setbacks in 2025. Indonesia’s Grasberg underground mine was shut down after a fatal incident, and Chile’s El Teniente suffered tunnel collapses and downtime. Hareesh V said, “2025 saw an exceptional set of setbacks in the mining industry,” reinforcing supply stress and bullish sentiment.
4. Electrification and AI-related demand
There has been a remarkable structural increase in demand from the energy transition themes. According to Hareesh, “the energy transition, electric vehicles, renewables, network expansion and AI data center build-out are copper-intensive,” driving end-use demand from sectors outside traditional infrastructure.
5. Global vulnerability and regional tightness
Hareesh also noted: “Copper supply at the mine side is unusually fragile,” pointing to shortages of 124-230kt in 2025, with a further shortage likely in 2026. Stocks rose on COMEX but fell on LME and SHFE, reflecting the tightness and supply diversion to the US due to tariff-driven flows.
6. Domestic factors in India
Indian copper futures have also risen, supported by domestic dynamics. “India has reported copper demand growth of over 9% by 2025,” Hareesh said. He attributed this to construction, renewables, consumer durables and mobility, adding that “India reflects global dynamics but adds local demand and policies.”India’s dependence on refined imports has exacerbated the local cash crunch following the closure of Sterlite in 2018. He added: “Strategic supply efforts by the Indian government underscore the country’s structural tightness and rising need for copper,” driving up domestic premiums.
Jigar Trivedi, Senior Research Analyst at Reliance Securities, said: “Copper futures rose to $5.8 per pound at the end of December, hitting new record levels on tight global supplies and a softer US dollar. London Metal Exchange futures reached $12,960 per tonne, following strong gains in Shanghai and New York.”
What awaits us for 2026?
The outlook for 2026 is determined by a mix of supporting and compensating factors.
According to Hareesh V, the current tightness could last until early 2026, but volatility is expected. “There are expectations of volatile prices in 2026 as the market moves back and forth between tariff policy, mine recovery and still healthy demand,” he noted.
Potential risks to the rally include “any policy-induced surplus, faster scrap/refining additions, weaker Chinese demand or a stronger USD,” Hareesh warns, “which are likely to offset the bullish outlook.”
Jigar Trivedi added that copper demand is expected to remain strong in the long term. He said: “Copper demand is expected to remain strong in the long term due to the global energy transition, with prices in New York rising by around 42% this year.”
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He also highlighted the impact of tariffs and the dollar, saying: “Previous concerns about US tariffs and continued metal inflows into US warehouses have increased supply pressures, while recent dollar weakness has made commodities more attractive to buyers.”
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)
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