Copper’s unstoppable run! Prices at all-time highs. What’s driving the surge, and will it sustain in 2026?

Copper prices have surged to fresh record highs in late 2025, supported by a confluence of macroeconomic tailwinds, supply disruptions, and structural demand from electrification and AI-linked infrastructure.

The benchmark LME three-month copper contracts repeatedly tested the $12,000 per tonne level, while Indian copper futures surged above Rs 1,240/kg. The January 30, 2026, futures contract was quoting at Rs 1,318.95 per kg, up Rs 41 or 3.21% in a single session, touching a lifetime high of Rs 1,392.95.

According to Hareesh V, Head of Commodity Research at Geojit Financial Services, the rally reflects “an unusual combination of structural demand, acute supply frictions, and policy-driven distortions that have reshaped trade flows.”

What’s fuelling the surge in copper prices?

1. Policy easing and macro tailwinds

The US Federal Reserve's 2025 easing cycle, marked by three consecutive 25-basis-point rate cuts, buoyed investor risk appetite across asset classes. Hareesh V explains, “Copper hit successive records after the December cut as traders priced stronger US growth and cheaper financing for capex-heavy industries like grids, manufacturing, [and] data centres.”

2. Trade-policy arbitrage and stockpiling

Fears of US import tariffs on copper created arbitrage opportunities between exchanges, drawing vast stockpiles into US warehouses. This trend led to tightening elsewhere and a premium for COMEX prices versus the LME. “COMEX stocks surged to multi-year highs while LME inventories fell,” Hareesh noted, “distorting the physical market and pushing LME prices higher despite localised comfort in the US.”

3. Mine-side supply disruptions

The supply side has seen a string of setbacks in 2025. Indonesia’s Grasberg underground mine faced halts after a deadly incident, and Chile’s El Teniente suffered tunnel collapses and downtime. Hareesh V said, “2025 saw an exceptional string of mine setbacks,” reinforcing supply stress and the bullish sentiment.

4. Electrification and AI-linked demand

There has been a notable structural demand uptick from energy transition themes. According to Hareesh, “The energy transition, EVs, renewables, grid expansion and the data-centre buildout for AI are copper-intensive,” driving end-use demand from sectors beyond traditional infrastructure.

5. Global fragility and regional tightness

Hareesh also flagged, “Mine side supply of copper is unusually fragile,” pointing to deficits of 124–230kt in 2025, with further shortfall likely in 2026. Exchange stockpiles rose on COMEX but fell on LME and SHFE, reflecting tightness and supply redirection into the US due to tariff-driven flows.

6. Domestic factors in India

Indian copper futures have also rallied, supported by domestic dynamics. “India has reported more than 9% demand growth for copper in 2025,” Hareesh stated. He attributed this to construction, renewables, consumer durables, and mobility, adding that “India mirrors global dynamics but adds local demand and policy.”

India’s reliance on refined imports has added to local tightness post the 2018 Sterlite closure. He added, “Strategic supply efforts by the Indian government underscore the structural tightness and the country’s rising need for copper,” pushing up domestic premiums.

Jigar Trivedi, Senior Research Analyst at Reliance Securities, said, “Copper futures climbed to $5.8 per pound by the end of December, hitting new record levels on tight global supplies and a softer US dollar. London Metal Exchange futures reached $12,960 a ton, tracking strong gains in Shanghai and New York.”

What lies ahead for 2026?

The outlook for 2026 is shaped by a mix of supportive and counterbalancing factors.

According to Hareesh V, the current tightness may persist into early 2026, but volatility is expected. “There are expectations of volatile prices in 2026 as the market toggles between tariff policy, mine recoveries, and still-healthy demand,” he noted.

Potential risks to the rally include “any policy-induced surplus, faster scrap/refining additions, softer China demand, or a stronger USD,” which Hareesh warns “is likely to negate the bullish outlook.”

Jigar Trivedi added that copper demand is expected to remain strong over the long term, saying, “Copper demand is expected to stay strong long-term due to the global energy transition, with New York prices up roughly 42% for the year.”

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He also highlighted the impact of tariffs and the dollar, stating, “Earlier tariff concerns in the US and continued metal inflows into American warehouses have added to supply pressures, while the recent dollar weakness has made commodities more attractive to buyers.”

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)