Copper prices have surged past $14,500 per tonne on the London Metal Exchange (LME), marking a 16-17% increase in 2026 and nearly 48% over the past year. This sharp rise stems from declining supply and growing demand, creating a significant market imbalance.
Supply Challenges in the World’s Largest Producer
Chile, responsible for nearly a quarter of global copper output, faces production setbacks. Codelco, the country’s largest copper mining company, experienced a fatal rockburst and tunnel collapse at its El Teniente mine, leading to a 25-year production low. Seismic risks have halted expansion work, reducing the mine’s output to 3 lakh tonnes annually for the next five years, down from 3.56 lakh tonnes previously.
Other major Chilean mines, including BHP’s Escondida and Spence, grapple with declining ore grades, aging infrastructure, and delayed expansion projects. A shortage of sulphuric acid, essential for extracting copper from low-grade ores, further complicates matters. China’s decision to halt sulphuric acid exports to prioritize domestic fertilizer production has worsened the situation, as 15% of global copper production relies on this chemical.
Rising Demand from Emerging Sectors
While supply falters, copper demand soars. Beyond traditional uses in electrical wiring, plumbing, and electronics, copper is increasingly vital for electric vehicles (EVs), which require three times more copper than conventional cars. The metal is also critical for grid modernization, renewable energy, and AI data centers, which demand heavy copper infrastructure for cooling and power distribution.
According to S&P Global, global copper demand is projected to rise from 28 million tonnes to over 42 million tonnes by 2040. Data centers alone are expected to consume 2.5 million tonnes by then, up from 1.1 million tonnes currently. This surge in demand, coupled with supply constraints, has led to a 1.5 lakh tonne deficit this year, a stark contrast to the 2.09 lakh tonne surplus previously anticipated by the International Copper Study Group (ICSG).
The London Metal Exchange (LME), New York’s Commodity Exchange (COMEX), and the Shanghai Futures Exchange (SHFE) significantly influence copper trading, affecting both prices and physical distribution. Normally, arbitrage keeps prices across these exchanges aligned, but recent trends have disrupted this balance.
Traders are moving large copper stockpiles to the US, driven by fears of impending tariffs rather than price differentials. US President Donald Trump imposed a 50% tariff on copper products last year, excluding raw materials.
Global Production and Reserve Distribution
Beyond Chile, major copper-producing nations include Peru, the Democratic Republic of Congo, China, and the United States. Collectively, they produce approximately 20-25 million tonnes of copper annually. Chile’s dominance in both production and reserves—holding around 180 million tonnes, or 18% of global reserves—highlights its key role in the global copper market. This is nearly double the reserves of Australia, the next largest holder.
Despite this, Chile’s production is expected to decline by 2.6% this year, falling to 5.3 million tonnes. This reduction is part of a broader trend affecting global copper output, as mines worldwide face aging infrastructure, declining ore grades, and delayed expansion projects. The situation is further complicated by the shortage of sulphuric acid, exacerbated by China’s export restrictions and logistical disruptions in the Strait of Hormuz.
Market Forces and Tariff Implications
The US aims to reduce reliance on foreign processing, especially from China, which controls a significant portion of global copper-smelting capacity. While tariffs on copper products are already in place, critics argue that tariffs alone won’t resolve the US’s reliance on foreign processing, as building new smelters takes years.
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