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Copper prices have been highly volatile in recent months, reflecting both structural demand growth and short-term geopolitical influences. On the London Metal Exchange (LME), copper surged to an all-time high of $14,500 per metric tonne in early February 2026 before correcting sharply by mid-March. Yet, prices have since recuperated, consolidating in the $12,700–$13,000 range. A similar trend has been observed in India, where MCX copper is currently trading near Rs 1,300 per kg, underscoring the global bullish sentiment.

Key drivers of the rally

Several factors are driving this price action. The boom in artificial intelligence infrastructure, particularly hyperscale data centres, has created unprecedented demand for copper in power distribution and cooling systems. The global push toward electrification and renewable energy integration has intensified the need for copper in grid modernisation projects. Supply constraints are also playing a role, with declining ore grades and disruptions at major mines tightening availability. Geopolitical tensions, including trade tariffs and defence procurement, have added further volatility to the market. Additionally, speculative buying by investors anticipating long-term shortages has amplified the rally, while currency fluctuations—especially a weaker U.S. dollar—have made copper more attractive to international buyers.

Supply-demand imbalances

The current supply-demand scenario points to a deficit, with global refined copper shortfalls estimated at 330,000–400,000 tonnes in 2026. Smelting bottlenecks, particularly in China, have capped refined output, while regional imbalances have led to acute shortages and price premiums in certain markets. Recycling has provided some relief, but the secondary supply remains insufficient to bridge the gap. Moreover, delays in new mining projects due to environmental clearances and financing challenges have worsened the imbalance. However, unless significant investment flows into exploration and production, the deficit could widen further in the coming years.

Geopolitical pressures on copper

Geopolitical factors are amplifying these pressures. Elevated defence spending has increased copper demand for weapons systems and vehicles, while U.S. tariffs and stockpiling programs have removed large volumes from the open market. Ongoing tensions in West Asia have sustained military-driven demand, though the easing of conflicts could reduce defence consumption while stabilising supply chains. Sanctions on certain producing nations have also disrupted trade flows, while logistical bottlenecks in shipping lanes have added to costs. The broader geopolitical climate has made copper not just an industrial commodity but also a strategic resource, with governments increasingly treating it as critical to national security.

China’s central role and global industrial demand

China remains pivotal to copper’s outlook, with smelter production caps limiting supply even as demand surges from renewable energy expansion, electric vehicles, and Belt and Road infrastructure projects. Strategic reserve policies, including stockpiling and releases, further sway global sentiment. Beyond China, industrial demand is equally strong. AI data centres are projected to consume nearly 475,000 tonnes in 2026, while electrification and grid modernisation in Western nations sustain elevated usage. Electric vehicles require up to four times more copper than conventional cars, amplifying automotive demand. Renewable energy projects, particularly wind and solar farms, add significant copper intensity, while construction in emerging economies and smart city initiatives ensure that industrial consumption remains robust worldwide.

Impact of West Asian tensions easing

If West Asian tensions ease, copper demand linked to defence procurement may decline, but this would likely be offset by improved supply chain stability and stronger industrial consumption. Peace in the region could reduce shipping risks and lower insurance costs, making the copper trade smoother and cheaper. It may also encourage investment in infrastructure and energy projects, which would sustain demand from civilian sectors. Thus, while military demand may soften, industrial and developmental demand could rise, keeping overall consumption elevated.

Outlook remains positive for the long term

Copper’s trajectory carries significant macroeconomic weight, as rising prices elevate input costs across manufacturing, housing, automotive, and technology sectors, ultimately feeding into global inflationary pressures and challenging monetary policy. Emerging markets, where copper is vital for infrastructure, face added fiscal strain as budgets stretch and projects risk delay. In the near term, prices are expected to consolidate around $12,700–$13,000, with volatility shaped by geopolitical developments and speculative trading. However, the long-term outlook remains structurally bullish. Demand from AI infrastructure, electric vehicles, renewable energy, and global electrification initiatives is poised to sustain elevated prices. Despite inevitable corrections, copper has cemented its role as the decade’s most critical industrial metal.

(The author is Head of Commodity Research, Geojit Investments Limited)