Copper’s Volatile New Landscape

Ronan: Copper is historically the base metal most typically characterized by strong price stability relative to high trading liquidity, which is why the red metal has served for years as an effective proxy for the health of the global macroeconomic environment. But for the past year, Dr. Copper has become increasingly volatile in the face of a whole range of extreme price drivers. In the first half of 2025, fears of import tariffs drove a massive influx of cathode into the U.S. as a huge arbitrage grew between the U.S. COMEX and London Metal Exchange contracts. This sucked away available spot tonnage from the rest of the world, lifting both exchange prices and regional premiums.

While the imposition of import tariffs did not eventually transpire last year, they remain an ever-present specter and continue to drive strong import volumes way beyond physical demand well into the start of this year. Throughout the fourth quarter of 2025, concerns grew of a supply deficit because of the lengthy closure to Freeport's Grasberg mine in Indonesia following an accident, which combined with surging sentiment over long-term demand for copper from both the energy transition and AI data center boops.

Then in late 2025 and early 2026, a rush of financial investment into the metal space targeted copper as a mainstay, briefly pushing the metal to a record high of more than $14,000 per tonne on the LME at the end of January, up by around 60% from the start of 2025. The price has subsequently fallen back through Q3 into the $12,000 range, but remains at historically high levels. Copper is now in an uncertain phase following the onset of the conflict in Iran. The war represents downside pressure for copper from a weaker macroeconomic perspective, not least a potential global energy crisis. But some copper supply is exposed because of the disruption to shipments from the Middle East of sulphur, a key input for certain copper producers.

A host of questions surround the direction of copper pricing. What exactly happened to copper during this past crazy winter, and could it happen again? How serious is the sulphur shortage? And what about China? Smelters there are operating with treatment and refining charges deeper into negative territory than ever. How long is that scenario sustainable before they have to cut production? What happens if the U.S. follows through with its tariff plans this year?

To answer all these questions and more, I'm joined by a trio of Argus copper experts, Mike Hlafka in the U.S., Raghav Jain in London, and Ting Ao from our China team. I'm Ronan Murphy, and this is the Argus "Metal Movers" podcast. So, to begin, Raghav, now we have the benefit of a few months of hindsight, can you break down exactly what happened in late 2025 at the start of this year that drove that huge run-up in LME copper prices? And how much of it was fundamentals, how much was macroeconomics, and how much was financial speculation?

Raghav: Now, thanks Ronan. Well, I think the best way to frame the rally is that it started with fundamentals, but macro and financial flows turned it into something much bigger. On the fundamental side, the copper market was already tight. Mine supply growth was under pressure because of disruption at large operations. You mentioned Grasberg there. The absence of Cobre Panamá comes to mind as well.

The other issues facing the market were lower ore grades at legacy mines, slower project execution, and the continued difficulty of replacing tier one production. That backdrop was very visible in the concentrate market. Treatments and refining charges kept falling showing how aggressively smelters were competing for raw material. That tightening in concentrates was one of the clearest physical indicators behind the price rally. At the same time the broader mine picture was not particularly reassuring, and the largest 20 mines collectively produced less in 2025 than in 2024 with big disruptions at the likes of Grasberg and ongoing great pressure at major Chilean assets being at the helm of the decline.

So, there was a very real physical tightening story there, but then macro and financial drivers really took over. Copper increasingly started to trade as a proxy for electrification, a proxy for strategic scarcity, and to an extent, an inflation and macro hedge. That coincided with a very heavy exchange side activity. LME copper average daily volumes rose sharply in the first quarter of 2026 up about 30% year-on-year as market participants used copper much more actively as a hedging and risk management instrument during a very volatile geopolitical period. Copper increasingly began trading as a macro and positioning proxy rather than simply as an industrial metal. In other words copper joined wider hard assets trade. Tariff uncertainty and geopolitical risk pushed investors out of currencies and sovereign bonds, for example, and speculative and systematic flows started to dominate price formation.

That helps explain why prices could surge even while physical demand in China was not especially strong. The rally extended well beyond fair value employed by fundamentals, at one point, rising above $14,000 per ton as we saw earlier this year. Fundamentals indicated at $10,500 to $11,500 per ton level and the continuation higher was just systematic than repricing actual supply demand balances. So, my summary would be, fundamentals built the bullish case, macro made that case more urgent, and financial participation amplified the move.

Ronan: Thanks very much, Raghav. And Mike, would you say a similar kind of outlook from your side of the pond?

Mike: Yeah, but maybe a little more, Ronan, with the speculative buying because it seemed like that was pulling most of the weight on future supply concerns on COMEX. Because there's been a lot of ink that has been spilled about copper shortages in regards to like AI data center construction, and like Raghav said, the declining ore grades at major mines and shutdowns pushing the forward looking supply concerns. So, to say it simpler, copper prices hit record highs because traders priced in future scarcity and geopolitical risk even as the real world demand was already weakening and inventories were building in exchange warehouses.

Ronan: Absolutely, and you mentioned that. I mean, as Raghav said, the real demand from China was weakening, we saw these exchange warehouse inventories build. So, looking at that, we have seen that this play into how the price has fallen back, but it is still, historically, at a very high level. So, how exactly has the mixture of drivers for copper changed in the past few months since those January highs?

Mike: What has changed is that the anticipated real demand didn't materialize, and like we said, warehouses continued to grow, and China's buying slowed further and the market started to unwind which lowered the exchange price from the record highs. But they are still elevated, like you said, because they're still in the back of everyone's mind that future supply concerns are still out there.

Ronan: And, Raghav, in terms of how you see the current market drivers, what's your perspective?

Raghav: Yeah, just to add to what Mike said, I mean, there's a much more obvious disconnect now between the upstream and downstream market. What we have now, I suppose, is a market where the driver mix has shifted, but the floor remains high. Upstream still looks tight, you know, talk about concentrate availability being constrained, TCRC is continuing to fall, and mine supply growth remains patchy by all measures. But downstream, the refined market looks much more comfortable in the near term. ICSG data, for example, showed the global refined copper market posting a January surplus of around 17,000 tons, which is down from a surplus of about 60,000 tons a year earlier, but then I suppose still meaning that the market is broadly balanced not immediately short.

And inventories matter a lot here. Global refined copper stocks rose to around 1.93 million tons by the end of January, combined exchange inventories globally reached around 1.2 million tons by the end of February, which is, like, the highest level since March 2003. So, that changed sentiment substantially causing the price to drop from whatever it was, $14,000 per ton at one point. In recent months, the driver mix has shifted from the earlier scarcity and momentum trade and towards, now, high visible stocks, weak near-term demand, and macro concerns around inflation rates and growth.

But the reason prices are still historically high, is that the structural backdrop has not really changed. We had Goldman Sachs this week peg their surplus of the copper market at 490,000 tons now for 2026, which is up from 380,000 tons previously. That's a clear reflection of near-term weak demand. The price forecast moved up to $12,650 per ton for this year as well. So, today's reality, I suppose, can be summarized as inventories may be higher than they were during the rally, but the system does not still have much spare capacity, and small disruptions can still trigger outsized price moves. So, the mix has changed from less momentum and macro chasing than before, and there's an increased focus now on inventories and softer, near-term demand, but structurally, we've still got a very tight underlying market.

Ronan: And, Mike, looking at how you've both summarized what occurred in copper at the end of last year and at the beginning of this year, can it be argued that copper essentially began to trade like a precious metal during that period? That it's something more like gold or PGM rather than its traditional base metal status?

Mike: I would totally agree Ronan. Traders use copper as that safe haven asset like gold, but copper wasn't the classic safe haven, but was a temporary quasi safe haven scarcity trade. Tariff uncertainty pushed traders into copper before it was restricted coming into the U.S. The U.S. tariff situation created a fear of future supply disruptions, and traders and consumers rushed to secure physical copper.

Ronan: And Raghav, would you also agree on that? And I suppose the question is, if copper essentially did trade like a precious metal during that period, has that ceased now, and does this mean it could do it again?

Raghav: Yeah, well, I completely agree with what Mike said. Copper started benefiting from capital inflows, inflation hedging, geopolitical anxiety, U.S. policy volatility, essentially, a hedge against tariff risk, and this broader idea, I suppose, was also there that copper was the metal most closely linked to long-term strategic scarcity. That is a pattern or some of these patterns, at least. You normally associate more with precious metals than with a metal whose demand is still heavily industrial.

Because of these factors speculative buying accelerated, producer hedging faded at these high prices and liquidity underneath the market actually became more fragile. I think that phase has largely faded now. Today copper is behaving more like an industrial metal again responding to inventories, responding to Chinese import economics and demand, responding to macro demand risks, as we've now seen since the Middle East war started. So, I'd say, yes, there was a period when copper partly traded like a precious metal proxy. That has mostly seized, but the market is still carrying some of that strategic premium.

Ronan: Excellent. Thank you very much. So, Mike, we'll just delve a bit more further into the state of play with the U.S. because it was the influx of refined copper into the U.S. that was certainly one of the defining drivers of copper pricing in 2025 for both underlying exchange prices, but even more so, for premiums in Europe and Asia as stocks were drawn down there to head into the U.S. So, what is the current status of that U.S. inflow? What are current volumes like for imports and U.S. copper stocks?

Mike: Well, first of all, copper prices have remained volatile with big, daily swings up and down, but the monthly averages have fallen for two straight months. January had a record high COMEX average of $5.92 per pound, but February fell to $5.88 a pound, with March dipping to $5.69 a pound. That's down, but still $0.75 higher than March's average of last year. On the COMEX premiums, they remained relatively flat even after President Trump said back in July after a cabinet meeting that copper tariffs were going to be set at 50%. And that statement caused a flood of copper cathodes to hit U.S. shores.

But premiums have held on copper cathodes have held a low range of $0.5 to $0.8 per pound from last January to early February, but have since inched up a little bit higher, just $2 or $3 pennies higher because of the higher freight rates. Imports have slowed down to the U.S., and COMEX warehouses totals dropped 16 of the 22 days available in March, but remain elevated at 533,000 tons, which is still 460% higher than a year earlier. And some of the material in COMEX warehouses have been redirected to LME warehouses in New Orleans and Baltimore.

And on the LME warehouse side, they're growing and currently at their highest since March of 2018 at 385,000 tons, while Shanghai warehouses reached a record high in the middle of March at 433,000 tons, but have dropped the past three weeks. So, the combined total for the three exchanges is 1,210,000 tons. That's 127% higher than a year earlier. But talking to people in the industry, many have concerns that the typical metal that's in the shadows or non-registered cathodes, that number is low, which would mean cathodes would have to come from exchange warehouses to meet demand.

Ronan: Interesting. And looking at real fundamental U.S. copper demand, how is that looking at the start of the second quarter?

Mike: Well, demand has been tepid at best. And consumers are looking at flat to down in the short-term, even though the long-term story is still strong. The high COMEX prices are acting like a demand headwind, but there are pockets of demand strength. The second quarter doesn't look like it's going to fall off, but it has cooled with the high prices inventory overhang and cautious buying, which is offsetting strong demand from AI and electrification.

Ronan: And what's the current feeling on U.S. copper tariffs? Obviously, Trump administration, they pulled back on tariffs for refined copper cathode last summer when everyone thought they were about to be imposed. Are they going to revisit that this year?

Mike: Yeah. Right now, the plan is that the Commerce Department is to speak to President Trump by June the 30th on the effects of imported copper on U.S. national security. Dependent on the report, there may be tariffs on cathodes, and they also said high-grade scrap, but they didn't specify exactly what high-grade scrap consists of. But they're looking at a 15% tariff starting January 1st 2027, and then a 25% tariff starting January 1st 2028. In the short-term tariffs could tighten supply in the U.S. because the country relies heavily on imported cathode.

If imports become restricted and more expensive, consumers may need to look for alternative options. One likely outcome is increased demand for high-grade copper scrap as refiners and manufacturers try to supplement reduced cathode supply. In the long run, the U.S. may build more refining capacity. But building refiners takes time and requires significant investment. Even if new projects move forward, it will take several years before they can meaningfully reduce the country's reliance on imported cathode.

Ronan: So, politically, does the Trump administration have room to add even more inflationary pressure in the current economic environment, especially given the pushback he's had from the Supreme Court over the tariffs and the extra inflationary pressures added by the Iran conflict?

Mike: Politically-driven actions can absolutely add inflationary pressure to copper. In the current environment, they're one of the biggest upside risks, but the effects depend on which policies and timing versus demand conditions. But even policy rumors can move copper quickly.

Ronan: And what would be the price impact of tariffs at this stage on both COMEX prices and premiums?

Mike: Tariffs would effectively raise the costs of imported copper because the U.S. is a net importer of cathodes, and less material would flow into the U.S. tightening supply. Materials would then most likely flow to Europe and Asia instead of the U.S. The COMEX exchange would trade at a premium to the LME and Shanghai markets, and the actual premium on copper cathodes would rise. And consumers still need metal, and they'd have to pay up to secure.

Ronan: And just touching briefly on the scrap market, and we'll ask Raghav the same a little later, but what impact have the high exchange prices, you know ,over the last four months really had on the U.S. copper scrap market?

Mike: Volatility increased, and with that, scrap yards repriced constantly, and consumer bids moved daily. Or the consumer was out of the market altogether making trade more difficult. Even at record prices, yards have struggled to secure volume. Some manufacturers have even delayed purchases and moved to a GIT program or just-in-time purchasing instead of stocking. And the high exchange prices created tight supply, high value, and globally-competitive scrap market. High copper prices don't just affect the metal itself, it ripples directly into buying power, financing across the supply chain, working capital gets eaten up, credit lines tighten, hedging costs increase, inventory financing becomes riskier, and that all causes demand destruction.

Ronan: Thanks very much, Mike. we're going to pivot now, well, first, to the Middle East and Africa, with Raghav kind of overseeing currencies in those markets as well as Europe, and then on to what's currently happening in the European sphere. So, Raghav, can you just briefly summarize the risk that the disruption of sulfur supplies from the Middle East poses to global copper production?

Raghav: Yeah, well, the key point is that this is a real risk, but it is not a broad-based, global copper supply shock today. It is a regional and process specific risk. The biggest exposure is in SX-EW and acid leaching operations, especially in the DRC, and to a lesser extent, Zambia. That's because sulfur is a critical feedstock for sulfuric acid, and sulfuric acid is essential for cathode production via leaching and electro-winning. The Middle East supplies roughly a quarter of global sulfur output and the Strait of Hormuz is a critical route for these flows.

So, when shipping through that route is disrupted, as we've seen in recent weeks, the African copper belt becomes exposed very quickly, but the impact is uneven even there. In the DRC, exposure is high because of a meaningful share of production depending on acid-intensive processing. Zambia is less exposed than people often assume because it relies more on concentrate smelting, and smelters generate sulfuric acid as a by-product so they've got domestic capacity. Other major producing regions like Chile and Peru are even more insulated overall because they rely more heavily on sulfide or smelting rather than acid-dependent cathode routes. So, this is really a copper belt leaching story, not a whole market copper supply story.

What matters though is that this African copper belt supply risk is landing on top of an already fragile system. Kamoa-Kakula is a good example. Ivanhoe, last week, cut 2026 guidance to 290,000 to 330,000 tons from an earlier 380,000 to 420,000 tons, and its 2027 target is still below previous expectations as well. That cut was driven by seismic disruption not sulfur, but it shows that African supply growth was already under pressure before this new sulfur risk emerged. Now, delivered sulfur prices into Kolwezi have reportedly risen to close to $900 per ton, which is materially raising acid costs. So, the sulfur story matters because it adds a new layer of stress to a region that is already central to future copper supply growth. This isn't priced in at the moment, but sustained disruption could start having a serious impact to the copper belt and the copper produced from there.

Ronan: And which importing markets will be the most affected by disruption to that copper belt production, and what will the impact be on premiums there?

Raghav: Well, the most directly affected market would probably be China because it is the main absorber of African cathode units, but right now, the impact is still theoretical rather than visible in premiums. China's refined market has been relatively well supplied this year if you look at the numbers. Domestic refined copper production rose 9% year-on-year in January, February. Cathode imports fell 25% and exports rose 71%. That tells you China has been relying less on imported refined metal in the near term. The arbitrage window stayed mostly shut. LME prices outpaced those on the Shanghai futures exchange, and that reduced the attractiveness of imports as well.

So, even if African production tightens, there is some buffer there for now. China has some buffer for now because domestic refined production is high and import arbitrage has been weak. That's why Shanghai cathode premiums have remained relatively muted rather than exploding higher as you might have seen otherwise. Europe would also feel some effects, but again, premiums are currently flat because spot demand is weak and supply is comfortable in the region.

So, we have Rotterdam premiums around the $150 to $170 per ton, relatively flat over the past couple of months. Deliver Germany premiums, relatively flat again, $200 to $210 dollars per ton, so the market is not pricing a DRC supply shock, yet. If a prolonged sulfur shortage did begin to reduce African cathode output, then yes, I think you would expect tighter cathode availability, firmer regional premiums, and probably, the strongest impact in China first because of its role in taking African units. But at the moment, inventories and weak spot demand are still dominating, so we haven't seen much of an impact.

Ronan: Well, we're going to be speaking shortly to Ting about how sulfuric acid prices have been influencing Chinese smelter behavior. But there hasn't been nearly as much discussion about how those acid prices might be influencing European smelters. So, just interested to know what you might think about that. Might that give European smelters some bandwidth to keep their own premiums lower, to try and take market share from African production if that goes offline?

Raghav: Yes, potentially. This is one of the interesting asymmetries in the market right now. Smelters processing concentrate generate sulfuric acid as a byproduct, so they are not exposed to sulfur shortages in the same way as leaching operations. Higher acid prices can, of course, support smelter economics. So, that matters for Europe too. We've seen that in China, of course, where smelters have kept refined production high despite falling TCRCs. European smelters are structurally less exposed to sulfur disruption. And if acid prices remain high, that can improve their commercial position relative to acid-dependent copper cathode production in places like the DRC.

So, yes, if African supply were disrupted, European smelters could potentially remain competitive, keep premiums more contained than otherwise, and capture some market sharing directly. European smelters could be relatively better placed because their economics are less exposed. Higher acid prices can help offset concentrate tightness, and that could allow them to remain competitive without needing to push cathode premiums sharply higher. So, yes, in theory, stronger acid values could help European smelters defend market share against African cathode if those flows were to tighten.

Ronan: Excellent. Thank you. And now we spoke a little bit about the U.S. scrap market, and I think a lot of the dynamics Mike spoke about are also affecting European copper recyclers as well in terms of the challenges of volatile and high exchange values. But looking at another factor that is perhaps more directly affecting European copper scrap relative to the U.S. right now is the Middle East crisis. Asia buys a lot of scrap from the Middle East. Are Asian buyers seeking more European material to replace Middle Eastern units?

Raghav: The answer is yes, at the margin. I mean, if you look at the European scrap market as a whole, it's still fundamentally soft and insulated from what's been going on in the Middle East for the most part. Scrap tables are flat and demand is weak, supply is ample, and activity has been slow in the weeks leading up to Easter. But the Middle East crisis is affecting the market through logistics and trade flows. So, Argus has reported that Chinese traders suspended purchases of copper scrap from Middle Eastern suppliers because of the conflict. Now, Saudi Arabia and the UAE accounted for just under 4.5% of China's total copper scrap imports last year. So, it is not dominant, but it is enough to matter, I suppose.

At the same time Chinese scrap imports rose 4.6% year-on-year in the first two months of the year, and buyers shifted towards alternative origins such as Thailand, Japan, and Europe. That suggests there is some redirected buying interest. In Europe, specifically, higher freight costs linked to the Middle East crisis are also supporting scrap replacement values. That's why even though payables have been flat recently, there is still some underlying upside support from freight and export economics. So, I'd frame it as not a major transformation of the European scrap market, but definitely a supportive influence of the margin.

Ronan: Okay, thanks very much, Raghav. So, let's now move to the China side of the copper picture at the moment with a few questions for Ting Ao. Ting, how is disruption to sulphur supply from the Iran conflict going to impact Chinese copper smelters ability to produce sulphuric acid and offset their negative copper margins?

Ting: Most Chinese copper smelters use primatological processes to produce refined copper from concentrates relying largely on sulphide smelting that generates sulphuric acid as a byproduct. Domestic sulphuric acid prices have risen sharply across most regions supported by disruptions to Middle East trade flows and firmer domestic sulphur prices. Chinese smelters typically produce around 4 tonne of sulphuric acid for each tonne of refined copper. Rising acid prices have therefore boosted byproduct revenues. Sulfuric acid prices in Shandong province increased by ¥740 per tonne in the past month, lifting smelters revenues on acid sales by nearly ¥3,000 per tonne.

Ronan: Okay. So, why are copper treatment and refining charges moving even further negative and even with the higher sulphuric acid prices? How long is this sustainable before we see widespread smelter capacity cuts?

Ting: August smelter purchase TC fell to minus $76.1 per tonne on the 3rd of April, from minus $51.6 per tonne on the 27th of February. Concentrate sellers lowered offers after higher sulphuric acid prices increased smelter byproduct income on the back of tight concentrate supply. But we haven't seen widespread smelter capacity cut as lower TC's are offset by higher sulphuric acid prices. China's refined copper output rose by 9% on the year in January to February supported by continued concentrate inflows. The country's copper concentrate imports rose by 5% on the year in the first two months. Some major smelters such as Jiangxi Copper and Daye Nonferrous set their production guidance this year flat from last year. So, we may not see large-scale smelter capacity cut this year.

Ronan: Okay, thanks. So, if supply is still looking strong, how is real, physical copper demand in China looking this year? And what is the downside risk of that demand from potential oil and energy shock as a result of the Iran conflict?

Ting: China's copper demand growth is expected to slow down from last year. Market participants expect a growth rate of 1% to 2% percent this year. This is because demand growth in the new energy sectors, which is a major driver of Chinese copper consumption in recent years has moderated. China's new energy vehicle output and sales fell by around 9% and 7% on the year in January to February following cuts to purchase incentives. The country's newly added solar power installations also fell by 18% on the year in the first two months given policy uncertainty and weaker project economics.

In terms of downside risks from a potential oil and energy shocks, in short-term, the impact was minimal. The conflict mainly affected copper prices and sentiments in the past month. But a medium-term downside risk is expected to emerge in semi-appliances and export linked demand. If the energy disruption is prolonged, there will be meaningful downside to China copper demand growth via GDP investment and the logistic channels. In market terms, an Iran-triggered energy shock would cap upside rather than trigger a collapse in China copper demand, but it materially increases the risk of the low-trend consumption growth in the second half of the year.

Ronan: Ting, thank you very much. That concludes the podcast. For more information on our prices and all the rest of our news and analysis coverage, please visit www.argusmedia.com.