The Copper Conundrum: A Supply Chain at a Tipping Point

As of Dec 4th, the LME shows the Copper 3-month closing price is $11,450.00 per ton, a 3.07% increase. According to LME data, the volume of copper withdrawal requests at its tracked warehouses surged by 50,575 metric tons, reaching 56,875 metric tons. This represents the largest increase in tons since 2013.  Prices continue to climb while inventories shrink. UBS raised its copper price projections for 2026: the forecast for March 2026 is $11,500 per ton, rising to $12,000 by June, $12,500 by September, and $13,000 per ton by December 2026 in a report released on Nov 28.

The tightening copper supply chain has become a defining feature of the current market, driven by supply-demand imbalances, price volatility, geopolitical factors, and surging demand from the new energy and artificial intelligence sectors.

Global copper resources are highly concentrated, with the top five producing countries—Chile, Peru, Congo, among others—holding over 70% of the world’s reserves. This geographic concentration renders the global copper supply chain vulnerable to geopolitical tensions, climate events, and trade policies. For instance, the Grasberg copper mine in Indonesia suspended operations due to a mudslide, reducing global supply by approximately 250,000–260,000 tons in 2025. Accidents such as the collapse at Chile’s El Teniente mine and seismic activity at the Kamoa-Kakula mine in the Congo collectively resulted in an annual supply loss of around 800,000 tons, equivalent to about 3% of global yearly production. Meanwhile, the average global copper ore grade has declined from 0.8% in 1991 to less than 0.45% in 2025. For example, the ore grade at Chile’s Escondida mine dropped from 1.6% to 0.6%, effectively doubling extraction costs. In response, major copper-producing countries have announced plans to cut production between the fourth quarter of this year and the first quarter of next year.

Copper demand is undergoing a historic transformation. While traditional sectors like power and construction maintain stable demand, explosive growth is coming from new energy and AI. A single battery-electric vehicle uses 80–83 kg of copper, four times that of a conventional internal combustion engine vehicle. An onshore wind turbine requires about 4 tons of copper, while offshore turbines, due to cables extending tens of kilometers, need 12–16 tons of copper.

AI data centers have emerged as a new "copper-hungry beast." According to Schneider Electric estimates, a 1 GW data center requires about 65,800 tons of copper. A single NVIDIA GB200 server contains 1.36 tons of copper, several times more than traditional servers.

The International Copper Study Group (ICSG) forecasts that the global refined copper supply-demand deficit will widen from 150,000 tons in 2025 to 300,000 tons in 2026. UBS holds a more pessimistic view, revising its 2026 deficit projection sharply upward from 87,000 tons to 407,000 tons. Mercuria has even warned that the copper concentrate deficit could reach 500,000 tons in 2026.

The tariff policies under the Trump administration are disrupting global copper trade flows and pricing mechanisms. In February 2025, the U.S. government initiated a Section 232 investigation into copper. On August 1, it imposed a 50% tariff on copper semis while exempting refined copper. Subsequently, on August 25, the U.S. enacted the Defense Production Act, designating copper as a "critical defense material" and planning to increase strategic reserves from 45 to 90 days of consumption. The premium for COMEX copper contracts over LME futures has sustained within the range of $980–1,025 per ton, representing a 47% increase since February. This substantial price differential has prompted traders to divert approximately 400,000 tons of copper to the United States, nearly 40% of the country’s annual refined copper demand. Many traders and producers anticipate that significant volumes of refined copper will continue flowing to the U.S. market as concerns over import tariffs persist. Mercuria's Snowdon said the US is likely to hold 90% of global copper inventories by the first quarter of 2026. This dynamic is expected to have cascading effects on other regions—the more refined copper flowing into the U.S., the more severe the shortages will become elsewhere.

As the world’s largest copper importer and processor, China relies on imports for over 80% of its copper raw materials and is heavily dependent on both the seaborne spot market and the LME pricing system. Should LME inventories be depleted, leading to a rapid increase in premiums, Chinese smelters and downstream manufacturers would face significant cost pressures. Industry observations indicate that companies utilizing copper-related materials—such as PCB manufacturers, motor producers, wire and cable makers, and new energy firms—have already begun receiving price increase notices from their suppliers. It is advisable that affected businesses promptly negotiate solutions with their suppliers to ensure supply continuity. Reach out to Jayson Cronin at jcronin@cca-im.com if you need a supply chain consultant in China, plus Southeast Asia. For more info check out our website www.cca-im.com.