Copper prices have surged past $14,000 per tonne, driven by a blockade in the Strait of Hormuz that has disrupted sulphur supplies essential for refining, coupled with significant production declines in Chile. This price increase reflects a confluence of geopolitical tensions and structural demand shifts, particularly from the AI sector and NATO’s rising defense expenditures, which are expected to create a long-term copper deficit that existing mining operations cannot meet.
The copper market is facing a paradox where high inventories in the U.S. suggest an oversupply, yet physical liquidity remains tight. This is exacerbated by strategic reserves and export restrictions on sulphuric acid from China, which have further constrained production capabilities. As a result, analysts are revising global supply forecasts downward, anticipating a structural deficit in the coming years as demand from AI data centers grows significantly.
Market professionals should note that while current prices reflect heightened demand, the long-term outlook remains uncertain. The interplay of geopolitical factors and technological advancements could lead to sustained high prices, but potential corrections may arise as tariffs and demand destruction in sensitive sectors like construction come into play.
Source: xtb.com