Copper: Record Highs Amid Supply Crisis and AI-Driven Demand - Praneeth Lakshman

Summary: 

Copper reached $5.21 per pound on October 29, 2025, driven by severe mine disruptions and surging demand for AI data centres. The Grasberg mine disaster removed substantial global supply, while a structural deficit looms for 2026. Volatility remains elevated following tariff-induced swings. Base case: bullish through 2026, with prices potentially reaching $13,500 per tonne by 2028 as supply constraints persist. 

Context: 

Copper futures reached $5.21 per pound (approximately $11,480 per tonne) on October  29, 2025, up 20.38% year-over-year (Trading Economics, 2025). The rally follows extreme Q3 volatility, with prices hitting a record $5.81 per pound on July 23 before plummeting to $4.37 by August 5 following tariff clarification (Nasdaq, 2025). The  September 8 mudflow at Indonesia's Grasberg mine—killing seven workers and forcing  production cuts—eliminated substantial supply, with estimates ranging from 260,000 to 270,000 tonnes annually through 2026 (Discovery Alert, 2025). Additional disruptions at  Chile's El Teniente and the Democratic Republic of Congo's Kamoa-Kakula operations tightened markets further. The International Copper Study Group now forecasts a  150,000-tonne deficit in 2026, reversing earlier surplus projections (Nasdaq, 2025).  Meanwhile, BloombergNEF projects AI data centres will consume 400,000 tonnes annually, peaking at 572,000 tonnes in 2028 (Mining.com, 2025).

Bullish Case: Supply fundamentals remain severely constrained. The Grasberg mine won't return to full production until 2027, while the International Copper Study Group downgraded its 2025 surplus forecast from 209,000 to 178,000 tonnes following the disaster (Nasdaq, 2025). By 2035, global supply is projected at just 29 million tonnes against demand of  35 million tonnes, creating a 6 million tonne deficit (Mining.com, 2025).

On the demand side, AI infrastructure is experiencing unprecedented growth: BloombergNEF estimates that data centres will require 572,000 tonnes in 2028, with cumulative demand exceeding 4.3 million tonnes by 2035 (Mining.com, 2025).

Microsoft's Chicago data centre alone required 2,177 tonnes during construction (Mining.com, 2025). Power transmission and wind energy consumption are expected to nearly double by 2035, intensifying the structural squeeze (Mining.com, 2025). With inventories depleted and minimal new supply scheduled, BloombergNEF forecasts that prices could reach $13,500 per tonne by 2028 (Mining.com, 2025). 

Bearish Case: Near-term downside risks include Chinese economic weakness, particularly in real estate, which weighs on demand from the world's largest consumer, accounting for nearly 60% of global refined copper consumption (Discovery Alert, 2025). The International Copper Study Group still projects a 178,000-tonne surplus for 2025 overall, suggesting a near-term oversupply before the 2026 deficit materialises (Nasdaq, 2025). Easing of US-China trade tensions could remove the latest catalyst that pushed prices toward record highs in late October (Trading Economics, 2025). Additionally, speculative positioning remains elevated following the tariff-driven surge, creating vulnerability to sharp corrections driven by negative catalysts. 

Volatility Outlook: Copper experienced extreme volatility in Q3 2025, with daily swings exceeding $1.40  per pound—a 32% range from peak to trough—following Trump's July 8 tariff announcement (Nasdaq, 2025). The metal's unprecedented 30% premium of COMEX  over LME prices during the tariff panic, compared to a five-year average of

0.5%,  demonstrates heightened sensitivity to geopolitical developments (Nasdaq,

2025).  While supply-demand fundamentals have reasserted dominance since September, the market remains vulnerable to policy shifts and trade tensions through 2026 (Discovery  Alert, 2025). 

Conclusion and Takeaways 

Base case outlook: Base case outlook: Bullish through 2026, strongly bullish 2027- 2028. Unresolved supply constraints following the Grasberg disaster, combined with accelerating AI-driven demand, support the International Copper Study Group's forecast of a 150,000-tonne deficit in 2026 (Nasdaq, 2025). This deficit is expected to expand significantly toward 2035 as data centre demand peaks (Mining.com, 2025).  Prices are likely to remain elevated in the $5.00–$5.50 per pound range through mid-2026, with the potential to reach $13,500 per tonne by 2028.

Actionable Insights: 

•  Monitor Grasberg recovery timelines and Q4 2025 Chinese property sector data;  production delays or renewed real estate stimulus would signal further upside toward $6.00 per pound through Q1 2026. 

•  For tactical positioning, consider ratio call spreads on COMEX 

March/September 2026 contracts (long $5.50 strikes, short $6.50 strikes) to capture the structural supply deficit while hedging against near-term demand weakness or tariff policy reversals. 

Sources: 

•  Discovery Alert (2025) 'Copper price forecast: will prices hit $12,000 per tonne in  2025?', October. Available at:

https://discoveryalert.com.au/news/copper-price forecast-2025-2026-record-highs/ (Accessed: 29 October 2025). 

•  Mining.com (2025) 'AI data centers to worsen copper shortage – BNEF',

12 August. Available at:

https://www.mining.com/ai-data-centers-to-worsen copper-shortage-bnef/ (Accessed: 29 October 2025). 

•  Nasdaq (2025) 'Copper price update: Q3 2025 in review', 20 October.

Available at:

https://www.nasdaq.com/articles/copper-price-update-q3-2025-review (Accessed: 29 October 2025). 

•  Trading Economics (2025) Copper price chart and historical data. Available at: 

https://tradingeconomics.com/commodity/copper (Accessed: 29 October 2025).