The copper market is witnessing a significant shift as investors retreat, leaving physical buyers to take control amid deteriorating demand expectations, particularly from top consumer China. This change follows a buying frenzy earlier this year that drove copper prices to record highs above $11,100 per metric ton in May, fueled by predictions of a supply shortage.
However, prices have since plummeted nearly 20% due to weak manufacturing activity, leading to a market surplus sooner than anticipated. Analysts, including Macquarie’s Alice Fox, predict copper surpluses of 265,000 metric tons this year, with expected increases to 305,000 tons in 2025 and 436,000 tons in 2026. Fox noted that while prices may recover in the fourth quarter, larger surpluses in the coming years could result in a price decline towards $8,000.
Recent data shows that LME copper prices hit a four-and-a-half-month low of $8,714 per ton in early August, driven by recession fears and high interest rates that have exacerbated negative sentiment. With China consuming over half of the world’s refined copper, the current housing market slump and stagnant manufacturing sector pose significant headwinds for demand.
BNP Paribas analyst David Wilson highlighted that domestic demand in China appears weak when excluding exports, indicating no copper shortage. The International Copper Study Group reported a surplus of 416,000 tons in the first five months of the year, contradicting earlier deficit predictions.
Copper inventories in LME-registered warehouses have surged to five-year highs, primarily due to Chinese producers delivering surplus metal as they struggle to sell domestically. The resolution of potential supply disruptions from BHP’s Escondida copper mine has also contributed to stabilizing the market.
Looking ahead, while short-term surpluses are expected, structural changes in copper consumption driven by new technologies related to AI and the energy transition may create future deficits. Glencore’s CEO emphasized the critical role of copper in decarbonization efforts.