Copper’s week was defined by the unwinding of a historic London Metal Exchange squeeze, a still-unresolved decision on whether US tariffs will be extended to refined cathode, and a widening gap between where metal is physically sitting and where genuine demand actually stands. Prices below are quoted in US dollars per kilogram (US$/kg) and per tonne (US$/t) for comparison.

Market Overview

Copper spent the week unwinding one of the sharpest physical squeezes the LME has seen in years. Three-month LME copper eased to around US$13.89/kg (US$13,888/t) by Thursday — its lowest level since 3 August — as on-warrant stockpiles rebounded sharply after a 42-session drawdown that had taken available inventory down roughly 75% from its mid-April peak. The cash-to-three-month backwardation, which had spiked above US$0.54/kg (US$545/t) mid-week — a level not seen since the 2021 squeeze that forced LME intervention — narrowed to around US$0.18/kg (US$176/t) by Thursday as trading houses, Trafigura among them, delivered metal into New Orleans and London warehouses. COMEX copper held firmer at around US$14.31/kg (US$14,310/t, US$6.49/lb), with registered US inventories climbing to a record 670,000 tonnes — up roughly eightfold since February 2025 — as tariff-related stockpiling continues to draw metal out of the rest of the world’s exchange system.

Macro Issues

The Iran war remains the dominant macro overlay on the copper complex. Five months after the April ceasefire, which has since been breached repeatedly by both sides and extended twice — most recently under a 12/17 June memorandum — the Strait of Hormuz remains effectively contested, with Iran reportedly levying transit tolls exceeding US$1 million per vessel and forcing costlier Cape of Good Hope routings that add 10–15 days and 20–30% to freight costs. The conflict has disrupted roughly half of global elemental sulphur supply, threatening the sulphuric acid feedstock that underpins solvent-extraction/electrowinning (SX-EW) production, which accounts for 17–25% of global refined copper output; Codelco estimates the disruption is already adding close to 5% to its production costs. Layered on top are the Democratic Republic of Congo’s concentrate export ban, in place since late June, and the outage at Freeport-McMoRan’s Gresik smelter in Indonesia since 8 August, which has removed an estimated 340,000–400,000 tonnes of annual cathode capacity. The Financial Times and The Economist have both framed these overlapping shocks as evidence of an accelerating deglobalisation of critical-minerals supply chains, rather than a single one-off event.

Macro and Regional Themes

The week’s dominant new theme was tariff timing. The US Commerce Department missed its statutory 30 June deadline to recommend whether the existing 50% Section 232 tariff — currently applied only to semi-fabricated products such as pipe, tube, rod, wire and cable — should be extended to refined cathode, and no White House decision had been announced as at Thursday. That vacuum is fuelling speculation on US trading desks: a number now believe a decision, and possibly implementation, could land before year-end, ahead of the phased-from-2027 timeline that research houses such as ING and Société Générale still treat as their base case (Société Générale puts only a 14.6% probability on a 15% tariff being in force by 1 January 2027). Bloomberg and CNBC’s commodities coverage both describe the widening COMEX-LME spread — still near US$0.40–0.45/kg (US$400–450/t) — as having become a real-time gauge of that policy risk, and it is the reason July’s US copper imports topped 200,000 tonnes, the strongest month in twelve years. In China, the Yangshan import premium has narrowed as elevated domestic prices dent buying appetite, while closer to home the AUD and ASX-listed copper producers remain tightly correlated to the LME price given the sector’s export exposure.

Prices: Supply and Demand

Analyst forecasts remain unusually dispersed for a market this deep into its cycle. Goldman Sachs has lifted its year-end 2026 LME target to US$13.74/kg (US$13,735/t) from US$12.47/kg (US$12,465/t), while still flagging a plausible 490,000-tonne 2026 surplus and pointing to a longer-run 2035 target of US$15.00/kg (US$15,000/t). Morgan Stanley’s most recent published base case — US$10.65/kg (US$10,650/t), with a bull case of US$12.78/kg (US$12,780/t) and a projected 590,000-tonne 2026 deficit — has already been overtaken by the spot price, underlining how far tariff-driven flows have outrun fundamentals-based modelling. UBS’s US$13.23/kg (US$13,228/t) target now looks conservative too. The tension worth stressing this week is that record exchange stock movements are not being driven by demand growth. Both the US and China have effectively been drawing down available inventory — the US via tariff-anticipation stockpiling into COMEX, China via a scramble for concentrate following the DRC ban — even as underlying consumption looks soft: China’s copper cathode rod operating rate slipped to 58.89% (down 3.67 percentage points week-on-week), and Wood Mackenzie’s 4 August review shifted its full-year 2026 call to a modest global surplus. In other words, the removal of stock from visible inventory looks like a trade-flow and positioning story as much as a scarcity one, and it is that mechanical effect — not a demand shock — that is putting the more immediate pressure on price.

Supply and Demand Outlook

Beneath the near-term noise, the structural supply case CRU and Wood Mackenzie have been building through 2026 remains intact. CRU data shows spot treatment charges have collapsed from around US$21/t to effectively zero, evidence that concentrate supply remains structurally tight regardless of this week’s exchange gyrations. Wood Mackenzie estimates capital expenditure among the fourteen largest miners has roughly doubled since 2017 to near US$60 billion, with copper-specific capex up around 40% — much of it debt-funded — reflecting a decade of investor-enforced capital discipline rather than genuine resource scarcity. On demand, Goldman Sachs continues to expect grid infrastructure investment to generate more than 60% of copper demand growth to 2030, with EVs, renewables and AI-related data-centre build-out also intact as structural drivers, even as cyclical Chinese manufacturing demand softens. The ICSG’s own 2026 balance estimates continue to swing between a modest surplus and a 150,000-tonne deficit depending on how quickly Congo and Indonesian supply is restored — underscoring that the physical market remains only lightly out of balance even as price volatility, driven by tariff positioning and geopolitical risk, stays elevated. The next major catalyst is likely to be Washington’s tariff decision itself, whenever it lands.

Sources

Australian Financial Review · Financial Times · The New York Times · The Economist · Reuters Commodities · Bloomberg Commodities & Metals · CNBC · CRU · Wood Mackenzie · ICSG · Goldman Sachs Research · Morgan Stanley Research · UBS · ING · Société Générale · LME and COMEX benchmark data via Trading Economics.