Copper prices continued their strong rally through August and September so far, with LME copper reaching fresh record highs as a combination of supportive market fundamentals have pushed prices higher. Rather than a single catalyst, the move reflects persistent physical market tightness, uncertainty surrounding potential US tariffs on refined copper imports, ongoing mine supply challenges and resilient demand across key end use sectors.
It’s worth a review of copper prices ($/MT):
- Spot Copper: $14,720, up 49.0% year on year and 3.3% over the past month.
- 3-Month LME Copper: $14,683, up 48.1% year on year and 4.7% over the past month.
Physical market conditions remain particularly supportive. The LME cash to 3-month spread, an indicator of market tightness, peaked during August and remains in significant backwardation. When the cash price trades above the 3-month contract, it typically signals strong demand for immediate delivery of the metal and limited available supply. The persistence of elevated backwardation suggests consumers remain willing to pay a premium to secure prompt metal, reinforcing the view that underlying market fundamentals remain exceptionally tight despite record prices, as metal continues to be sent to the US.
The US Section 232 review continues to dominate near term market sentiment. More than two months after the review concluded, the market is still awaiting confirmation on whether tariffs will be imposed on refined copper imports into the US, with many participants expecting an announcement ahead of the expected January 2027 implementation. The lack of clarity has continued to support the premium between COMEX and LME copper prices, encouraging flows of metal into the US and contributing to tighter availability elsewhere in the global market.
Supply side developments have provided further support. Chile recently indicated that mine production is expected to decline, with second quarter output projected to be the weakest in almost two decades. This adds to a growing list of operational challenges across the mining sector, with several of the largest producers reporting lower output during the first half of the year. These disruptions highlight a broader structural challenge facing the market, as years of underinvestment during weaker price environments have limited the industry's ability to deliver meaningful supply growth.
Looking ahead, the outcome of the US tariff review remains the key catalyst for copper prices. However, declining mine production, continued inventory tightness and subdued global supply growth suggest market fundamentals remain constructive. While copper is trading at record levels, the combination of constrained supply and resilient demand continues to support a bullish outlook for the market.
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