Copper hits record high as structural deficit deepens and global race intens...

by TIAN Heqi

Copper climbed to new highs this year as electrification, AI infrastructure and years of underinvestment tightened supply. Governments and miners are stepping up efforts to secure long-term resources.

Benchmark prices on the London Metal Exchange reached US$11,210 a ton on Nov. 28, while Shanghai futures topped 87,000 yuan. China's A-share copper index has risen more than 70 percent this year.

"Fundamentals remain tight, and a sentiment premium is emerging," said XIAO Chuankang, analyst at Shanghai Ganglian, a Chinese metal provider. He said copper has entered an upward cycle that may last two to three years and possibly five to ten. Copper's dominant role in electrical systems, which account for more than 65 percent of global demand, limits substitution.

Tariffs spark volatility, but structural demand dominates

Washington's tariff actions triggered the latest rally. The Trump administration imposed a 25 percent duty under Section 232, a U.S. law that allows tariffs on national-security grounds, in March and lifted the rate to 50 percent in July. The move prompted traders to pull shipments forward. Mercuria estimated that about 500,000 tons of copper were heading to the United States in March, far above the usual 70,000 tons.

Analysts say the lasting forces lie in long-term electrification and digital infrastructure. Neal Qiu, a principal at Roland Berger, said these shifts are creating a new source of structural demand for copper. "These sectors use far more copper than traditional industries, and policy support makes the demand more durable," he said.

The IEA expects data centers to consume 250,000 to 550,000 tons annually by 2030. Goldman Sachs projects data-center electricity usage will rise 175 percent from 2023 to 2030, signaling broad infrastructure needs.

On the supply side, Qiu said elasticity has weakened as new discoveries decline and project lead times remain long. Declining ore grades and years of insufficient investment have reduced the industry's ability to respond quickly.

Production setbacks are adding pressure. Peru's Antamina recorded a 26 percent drop in output. The Kamoa-Kakula project in the Democratic Republic of Congo cut its 2025 forecast by 28 percent. Indonesia's Grasberg mine halted operations after landslides, removing 250,000 to 260,000 tons of output this year. The International Copper Study Group expects mined supply to grow only 1.4 percent in 2025, with the deficit widening in 2026.

Miners and governments intensify the race for assets

The U.S. Geological Survey has added copper to its 2025 critical-minerals list. Japan's JBIC is preparing to invest in Pakistan's Reko Diq project. India plans to increase domestic copper demand fivefold by 2047.

Producers are scaling up. BHP, Rio Tinto and Vale are expanding copper capacity. BHP is investing more than A$840 million to upgrade its Olympic Dam operations in South Australia. Rio Tinto expects Mongolia's Oyu Tolgoi to become the world's fourth-largest copper mine at full production. Vale is advancing its Novo Carajás expansion project in Brazil.

Chinese miners are also accelerating overseas investment. Zijin Mining (601899.SH), regarded internationally as the fourth-largest copper producer, holds major deposits in the DRC and Serbia. CMOC Group (603993.SH), a major supplier of copper and cobalt, increased output by 55 percent last year and is targeting 800,000 to 1 million tons by 2028.

Xiao said Chinese mining companies are expanding quickly in Africa and Southeast Asia and are also increasing recycling capacity at home. He noted that these efforts are important for strengthening long-term supply security.

China's downstream sector feels the strain

China is the world's largest copper refiner, but it relies on imports for more than 80 percent of its ore. This dependence exposes domestic fabricators to raw-material volatility and the 50 percent U.S. tariff that took effect on Aug. 1.

Manufacturers told Jiemian News that rising input costs have delayed orders and squeezed margins. "Downstream products still have relatively low value-added, and margins remain under pressure," Xiao said.

Some firms are turning to hedging and greater use of recycled copper to manage risk. Truchum Advanced Materaisl & Technology said it uses futures to lock in costs and maintains a procurement mix of 70 percent recycled copper and 30 percent cathode. According to Goldman Sachs, substitution becomes economical when copper trades at more than four times the price of aluminum. The bank estimates that this could limit copper prices to about US$10,500 in 2025 and US$11,500 in 2026.

Qiu said the current cycle is broader in its demand drivers and more influenced by policy than earlier ones. He noted that structural demand is likely to exceed supply growth, meaning tightness could persist for a prolonged period.