Copper prices hit a new high for the year, but "without China, there is no perfect bull market"

Copper prices on the London Metal Exchange (LME) have surged to a year-high, but analysts warn that relying solely on supply disruptions is insufficient to sustain a prolonged bull market.

Copper futures recently broke through $10,500 per ton, reaching the highest level since May 2024. The immediate catalyst for this surge was the announcement of force majeure at Freeport-McMoRan's Grasberg copper mine in Indonesia, the world's second-largest copper mine, due to a significant accident, leading to a sharp tightening of market supply expectations.

This incident is not an isolated case; it is the latest in a series of supply disruptions, following social unrest in Peru that led to the shutdown of Hudbay Minerals' Constancia copper mine. The ongoing supply tension, coupled with emerging demand narratives such as AI data centers and grid upgrades, has pushed copper prices to new heights.

However, some market observers warn that the current rise is a "bad bull market," as the current momentum in the copper market is primarily driven by supply disruptions rather than demand growth. As the world's largest copper consumer, China accounts for about half of global copper consumption, and copper prices need strong growth in Chinese demand to be supported.

Supply shocks continue to support copper price increases

Copper futures on the London Metal Exchange have surpassed $10,500 per ton, reaching the highest level since May 2024. This round of price increases is driven by multiple factors, including supply disruptions, rising AI demand, and grid upgrades.

On September 8, hundreds of thousands of tons of mud flooded the underground tunnels of the Grasberg mine in Indonesia, resulting in several worker fatalities. Freeport-McMoRan subsequently declared force majeure at the mine. Goldman Sachs commodity expert James McGeoch referred to this incident as a "black swan event."

This year has seen frequent supply disruptions in copper mining. In May, the Kamoa-Kakula mine in the Democratic Republic of the Congo experienced flooding, in July, an accident occurred at the El Teniente mine in Chile, and in early October, the Constancia mine in Peru was shut down due to social unrest. Hudbay Minerals disclosed last month that it had closed the processing plant operations at the Constancia mine in Peru due to ongoing social unrest.

Beyond the supply-side narrative, a strong narrative about future demand is also supporting the bulls. Goldman Sachs analysts Lina Thomas and Daan Struyven noted in a recent report that as AI and geopolitical tensions escalate, the grid is becoming a "vulnerable link in energy security," and copper is key to this, "copper is the new oil."

Analysts point out that whether supporting the massive power consumption of AI data centers or upgrading national grids, a large amount of copper is essential. Goldman Sachs expects that by the end of this decade, the construction of global grids and power infrastructure will contribute about 60% of the incremental global copper demand. Based on this assessment, they predict that copper prices will reach $10,750 per ton by 2027.

Fragile Uptrend: "Without China, There Is No Perfect Bull Market"

According to Bloomberg columnist Javier Blas, there are two types of bull markets in copper: the "good bull market" driven by strong demand is usually more sustainable, while the "bad bull market" driven by supply shocks tends to be short-lived. Currently, the copper market clearly belongs to the latter.

As the world's largest copper consumer, China accounts for about half of global copper consumption, and its demand growth is crucial for maintaining a bull market in copper prices. However, China has not been making large purchases at present. Additionally, trade tensions have also impacted copper consumption for exported products such as electrical appliances.

From market indicators, the copper premium in Shanghai bonded warehouses, which measures the health of the Asian market, is currently hovering around USD 50 per ton, below the average level of about USD 60.5 from 2020 to 2025.

Long-term Outlook Still Requires Demand Growth Support

Overall, the current rise in copper prices is not firmly based. Javier Blas clearly points out in his analysis that bull markets driven by supply shocks are often short-lived. He believes that while the supply loss from Grasberg is significant enough to potentially push copper prices up to USD 12,000 per ton in the next six months to suppress demand, this does not indicate the beginning of a multi-year bull market.

Market attention also needs to focus on potential supply recovery. For example, the Cobre Panama copper mine in Panama, which was closed due to legal disputes starting in November 2023, accounts for about 1.5% of global supply, and the new Panamanian government has expressed a willingness to discuss the possibility of its reopening. Once the mine resumes production, it will be sufficient to offset many other small mines' supply disruptions. Additionally, new projects from the Democratic Republic of the Congo, Chile, and Mongolia are expected to come online by 2026.

As for the long-term demand brought about by the energy transition—it is expected that refined copper consumption will double to 50 million tons by 2035, which is more of a vision for 2030 and beyond rather than a market reality for 2025. For investors, although current copper prices are at historical highs, to determine whether a truly sustainable bull market is approaching, the focus should be on when demand growth will accelerate, rather than hoping for a continued supply shortage