Copper, the industrial metal often viewed as a gauge for global economic health, has shattered records in 2025, with its price surge defying expectations of modest growth. In December, the benchmark price on the London Metal Exchange (LME) climbed to a historic peak, exceeding $12,000 per tonne. This remarkable rally represents an annual gain of over 35%, marking the metal's most significant yearly jump since 2009.
The Tariff Trigger: How US Policy Supercharged Prices
The rally's ignition can be traced directly to trade policies emanating from Washington. In August, US President Donald Trump imposed a 50% tariff on semi-finished and derivative copper imports. This move triggered a frantic stockpiling effort by American buyers ahead of the August 1 implementation date. Even though refined copper was initially exempt, the persistent fear that it could be included in future tariff announcements has kept the market on edge and buying aggressive.
This policy-driven anxiety has created a pronounced price divergence between major global exchanges. Copper prices in the United States have risen far more sharply than in London since January. This gap has opened lucrative arbitrage opportunities, where traders buy metal in the cheaper London market to sell at a profit in the pricier US market. The result has been a massive physical movement of copper. Approximately 340,000 tonnes of copper are now reportedly stranded in New York warehouses, a staggering increase from just 80,000 tonnes at the start of the year.
Supply Squeeze Meets AI & Green Energy Demand
Compounding the tariff-induced frenzy are severe supply disruptions at some of the world's most critical copper mines. A series of accidents has crippled output across three continents:
- In September, a mudslide struck Indonesia's Grasberg mine, the world's second-largest copper operation, forcing a force majeure declaration. Full production is not expected to resume before 2027.
- Chile and the Democratic Republic of Congo (DRC) also faced major setbacks, with a rock blast and severe underground flooding halting operations at key sites in July and May, respectively.
This tightening supply is colliding with explosive new sources of demand. The global artificial intelligence (AI) revolution is a primary driver. Hyperscale data centres built to power AI require immense amounts of copper—up to 50,000 tons per facility, according to the Copper Development Association. Furthermore, the global transition to clean energy and electric mobility is accelerating copper consumption. An electric vehicle uses about 53.2 kg of copper, more than double the 22.3 kg required by a conventional car, as per International Energy Agency data.
Diverging Bank Forecasts and the Dollar's Role
The outlook for copper is a subject of intense debate among financial institutions. Analysts at Citigroup project a bullish scenario where prices could soar to $15,000 a tonne, fueled by a weakening US dollar and anticipated Federal Reserve interest rate cuts. JPMorgan has also forecast the rally extending into 2026, citing acute supply constraints.
However, not all are convinced. Goldman Sachs Research has expressed scepticism, predicting a price decline in 2026 due to a modest expected surplus. The bank acknowledges that longer-term structural demand from power grid expansion and electricity infrastructure will likely provide sustained support beyond 2026.
The metal's price is also being buoyed by currency dynamics. Expectations of US interest rate cuts in 2026 have softened the dollar. Since copper is traded in dollars, a weaker greenback makes it cheaper for holders of other currencies, stimulating demand and adding another layer of upward pressure on its dollar-denominated price.
In essence, copper's record-breaking 2025 is a story of a perfect storm: geopolitical trade policies disrupting flows, unforeseen accidents constraining supply, and the twin technological megatrends of AI and electrification fuelling unprecedented demand.
