3 reasons why copper prices are surging
Instead, the note points to a potential copper deal with Chile as a more realistic path to securing U.S. supply.
SEATTLE (Scrap Monster): Copper prices have surged sharply over the past year, rising from about $8,700 a tonne in early 2025 to an all-time high above $13,000 in January 2026, marking a 52% increase.
According to Bernstein analyst Bob Brackett, the move reflects a combination of physical, financial, and policy-driven factors that have pushed prices well above historical norms.
One driver has been the supply disruptions at major copper mines. Brackett flags operational issues at assets such as Kamoa-Kakula and Grasberg as one of the factors contributing to higher prices over the past year.
A second factor has been increased financial speculation. Brackett notes that net futures positioning is “currently at elevated levels,” while the third and most prominent driver has been additional demand from U.S. inventory stockpiling.
Traders have been building inventories in anticipation of potential U.S. tariffs on refined copper, expected to be 15% from January 2027 and possibly rising to 30% by January 2028.
“As a result, CME-priced copper trades at a significant premium to LME-priced copper across maturities,” Brackett wrote. “This arbitrage window incentivizes imports into the US. Since April 2025, Comex inventories have risen by 300kt.”
Bernstein also lays out four tariff scenarios that could shape copper’s outlook, with its base case assuming no tariffs on refined copper.
Brackett argues that proposed 15% and 30% tariffs are illogical, noting that the U.S. imports about half of its copper, with more than 90% sourced from Chile, Canada and Peru.
A 15% tariff would raise the import bill by roughly $1.35 billion, he adds, while global smelting capacity is oversupplied and economics are poor, making large new U.S. investments unlikely.
Instead, the note points to a potential copper deal with Chile as a more realistic path to securing U.S. supply.
Brackett says tariff exemptions for Chilean copper could end the LME-Comex arbitrage, as U.S. buyers would be unwilling to pay elevated premiums when tariff-free imports are available.
Chile produced about 5.5 million tonnes of copper in 2024 and has more than one million tonnes of smelting capacity, which Bernstein says would be sufficient for U.S. needs.
Brackett also highlights that copper is trading at a significant premium to marginal cost. With inventories equivalent to around nine days of demand, prices are estimated to be about 121% above marginal cost.
The note shows that historically, buying copper at such elevated premiums has delivered negative average long-term returns, consistent with its margin-reversion framework, though short-term gains can still occur.
Courtesy: www.investing.com