Copper futures hit an all-time high of $14,533 per ton on the London Metal Exchange (LME). The commodity’s price has risen significantly since its January peak, and is up by nearly 17% over the last year. Let’s discuss what’s pushing the metal and if we will see a correction anytime soon.
Why Did Copper Prices Hit An All-Time High?
Copper’s latest surge comes after expectations of President Donald Trump potentially expanding US tariffs to refined copper imports. The anticipation of increased tariffs has led to traders shipping hundreds of thousands of tons of copper to the US. The move has led to a global supply shortage, and hence the price spike.
Another factor for global copper shortages is the rising demand for AI data centers and chips. Copper is an essential part of chip manufacturing and a large chunk of the global supply has been used to feed the growing AI industry. The high demand for AI chips and data center spending has also impacted the consumer electronic sector.Renewable energy and power grids also point to a potential structural supply crunch ahead. Adding fuel to fire, old copper mines are struggling to meet the ever growing global demand.
However, there is a chance that the Federal Reserve will raise interest rates by 25 basis points after the August jobs report did not meet expectations. Higher rates may lead to investors moving their capital to safe havens, such as gold. Such a move could lead to copper prices taking a hit.
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There is also a possibility that President Trump may not extend US tariffs to copper. If that is the case, the commodity may face a price correction soon. How things unfold is yet to be seen. We could face fresh volatility very soon.