This rise in base metal prices isn’t just a speculative run; it is rooted in a complex interplay of supply constraints, robust demand, geopolitical tensions and policy changes.
Supply disruptions: Copper production has been hit by a series of disruptions at major mines. Accidents at the El Teniente mine in Chile, protests in Peru and a deadly mudslide at the Grasberg mine in Indonesia have combined to remove hundreds of thousands of tonnes from global supply.
Demand for infrastructure and green energy: Global infrastructure spending and the transition to renewable energy are driving demand for metals such as copper and aluminum. Copper, essential for electrification, is in high demand, for electric vehicles, solar panels and network upgrades.
Weakening US dollar: A softer dollar makes dollar-denominated commodities cheaper for foreign buyers, increasing demand. Copper and aluminum in particular have benefited from this.
Investor sentiment: Inflationary pressures and economic uncertainty have investors turning to commodities as hedges, driving prices higher.
Global supply and demand dynamics
The global base metals market is currently walking a tightrope between rising demand and limited supply. Demand for copper continues to exceed supply. Forecasts indicate a potential shortage in the coming years due to a lack of new mining projects. The energy transition is an important driver, with copper use in electric vehicles, wind turbines and smart grids increasing.
In the case of aluminum, demand is increasing, especially in China, driven by the renewable energy and transport sectors. However, supply remains tight due to energy-intensive smelting processes and geopolitical constraints.
Although global production is growing, demand for zinc is also increasing, especially in the construction and automotive sectors. Zinc consumption in China is expected to grow, albeit at a slower pace than in previous years.
Geopolitical tensions and their impact
Conflicts in Eastern Europe and the Middle East, along with sanctions on Russia, a major aluminum producer, and instability in African copper-producing countries, have disrupted supply chains. Similarly, we are also witnessing tensions in the South China Sea. Maritime disputes impact shipping routes, creating logistical challenges and costs for metal transportation. Moreover, the resurgence of trade protectionism under President Trump has added another layer of complexity.
Trump’s Tariffs and Global Supply Chains
President Trump’s renewed tariff strategy has imposed blanket tariffs on steel and aluminum imports, prompting retaliation from key trading partners. These tariffs have disrupted global supply chains, driven up costs and forced companies to look for alternative sourcing strategies.
At the same time, the tariffs have accelerated the adoption of recycling and reuse practices, especially in the areas of aluminum and critical minerals, as companies look for cost-effective alternatives.
The Chinese question: still a dominant force
China remains the world’s largest consumer of base metals, accounting for more than 50% of global use. While demand was robust in the first quarter of 2025, recent data points to a cooling trend.
Demand for copper and aluminum grew significantly, driven by sales of electric vehicles and solar installations in the first quarter. Inventory build-up and increased exports point to a slowdown in domestic consumption in the second quarter. Stimulus measures and infrastructure projects continue to support long-term demand. Meanwhile, China’s strategic focus on green energy and urban development is ensuring sustained demand for base metals despite short-term fluctuations.
Looking ahead, the recent rise in base metal prices reflects deeper structural shifts in the global economy. From supply disruptions and green energy transitions to geopolitical tensions and tariff wars, the market is being reshaped in real time. While prices may face corrections in the short term, the long-term outlook remains optimistic, especially for metals such as copper and aluminum, which are critical to the future of energy and infrastructure.
(The author is Head – Commodity Research, Geojit Investments Limited)
(Disclaimer: Recommendations, suggestions, views and expert opinions are their own. These do not represent the views of the Economic Times)
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