Supply squeezed as demand rises

Geopolitics and accidents affect production

Gulf’s access to materials will be critical

Supply squeezes, rising demand expectations and speculative trading have driven copper prices to record highs, and industry experts say the metal is likely to remain expensive well into the year ahead.

Copper underpins the energy transition and digital economy, from electric vehicles and power grids to AI data centres, so sustained lofty prices will push up infrastructure and industrial costs particularly in fast-growing regions such as the Gulf.

The metal hit an all-time high of $13,310 per tonne on the London Metals Exchange (LME) on January 14 and while it then hovered down a touch, it was still over 25 percent more expensive than just three months earlier and around 40 percent higher than at the start of 2025.

“It’s been quite a year for the global copper market,” Kieran Tompkins, senior commodities economist with Capital Economics, told AGBI. “There’s been a lot going on.”

For the Gulf, all that activity is likely to mean a range of price hikes.

“The copper supply chain will see immediate cost inflation and quite likely margin pressure,” Robert Edwards, principal copper markets analyst at Commodities Research Unit, said.

“In the case of the GCC and Mena, higher copper prices will likely raise capex costs for electrical energy infrastructure projects in particular.”

The wisdom of some Gulf countries’ investment in mining is therefore being highlighted – as is the increasingly geopolitical nature of the metals business.

“Gulf countries have been positioning themselves not just as consumers, but as strategic partners and investors in global critical mineral supply chains,” Asna Wajid, research analyst from the International Institute of Strategic Studies in Bahrain, told AGBI.

“In this sense, critical minerals are becoming part of how the Gulf thinks about long-term economic security and international relevance.” 

Record prices

A number of factors lie behind the recent strength in copper.

On the supply side, US tariff threats have seen a flood of copper into the US from the LME and China, tightening availability elsewhere.

There have also been disasters at some of the world’s largest copper mines. 

In May 2025, seismic activity at the massive Kamoa-Kakula mine in the Democratic Republic of the Congo left output suspended.  

In July, a 4.2-magnitude earthquake hit the world’s largest underground copper mine, El Teniente in Chile. Six workers died and extraction was temporarily halted.

In September the world’s second-largest copper mine, Grasberg in Indonesia, suffered a massive mudslide, killing seven workers and halting production.

Smelter closures in China – which produces more than 45 percent of the world’s refined copper – are also due to impact future supply. 

In December the China Smelters Purchase Team, which represents about 60 percent of the country’s smelting capacity, announced it would cut output by around 10 percent in 2026, due to overcapacity.

Last year’s softer dollar also had an impact. 

“Copper prices are quoted in US dollars,” said Ana Rebelo from the International Copper Study Group, “so they tend to increase when the dollar weakens.”

Speculation over AI demand

Copper is generally in greater demand than it was a few years ago, due to its use in a variety of new roles.

“There is structural demand strength from ‘growth markets’, like electricity grids, battery energy storage systems, electric vehicles, data centres and defence,” Edwards said.

Copper is used in a variety of defence roles, including shell and bullet casings, as well as a range of weapons electronics. With defence budgets booming worldwide, this is also a growing source of demand.

Nonetheless, “growth in copper demand hasn’t really been all that big over the last year,” Tompkins said. “‘Unspectacular’ is how we’d describe it.”

Speculation may therefore be behind current prices too.

In particular, “expectations over AI are adding fuel to the fire,” Tompkins said, “with the rapid rollout and build of AI data centres.” 

Future prospects

Prices will probably remain high in the year ahead, although likely lower than now.

Copper mine supply should recover after 2025’s disasters, with research firm BMI predicting a 3.3 percent boost in global output. 

Demand should also continue to rise, with the AI investment boom in particular showing no sign of abating.

Consolidation among global mining giants Rio Tinto, Glencore, Teck Resources and Anglo-American may also divert their resources into mergers and acquisitions, rather than new mining output.

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Meanwhile, global risk continues to heighten, adding premiums to critical minerals such as copper.

Yet speculative inflows may be easing, with Goldman Sachs forecasting an 18 percent drop in prices by the end of 2026. UK brokers Peel Hunt put the year-end price at $11,750.

Whatever the case, though, “there is a growing recognition in the Gulf that access to minerals like copper, lithium and rare earths will define geo-economic standing and play a decisive role in shaping industrial competitiveness and geopolitical relevance”, Wajid said.

Expect strong competition for these key resources to continue in the year ahead.