Copper prices hit a new high for the year, but "without China, there is no perfect bull market."

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The price of copper on the London Metal Exchange (LME) has soared to a new high for the year, but analysts warn that relying solely on supply disruptions makes it difficult to sustain a prolonged bull market.

Copper futures recently broke through $10,500 per ton, reaching the highest level since May 2024. The immediate trigger for this surge was a declaration of force majeure by Freeport-McMoRan at Indonesia's Grasberg mine, the world’s second-largest copper mine, following a major accident—leading to sharply tightened market supply expectations.

This incident is not isolated—it is the latest in a series of supply disruptions. Previously, social unrest in Peru had resulted in the shutdown of Hudbay Minerals' Constancia copper mine. Ongoing supply tightness, together with emerging demand from AI data centers and power grid upgrades, have jointly pushed copper prices to new heights.

However, some market observers warn that the current rally is a “bad bull market”, with copper's current rise mainly driven by supply interruptions rather than demand growth. As the world's largest copper consumer, China accounts for about half of global copper consumption. Copper prices require strong growth in Chinese demand for support.

Continuous Supply Shocks Support Copper Prices

LME copper futures prices have broken through $10,500/ton, reaching their highest level since May 2024. This rally has been driven by multiple factors, mainly supply disruptions, increasing AI demand, and power grid upgrades.

On September 8, hundreds of thousands of tons of mud flooded the underground tunnels of Indonesia’s Grasberg mine, causing the deaths of several workers. Freeport-McMoRan subsequently declared force majeure at the mine. Goldman Sachs commodity expert James McGeoch called the event a “black swan event.”

This year has seen frequent copper mine supply disruptions. In May, the Kamoa-Kakula mine in the Democratic Republic of Congo suffered flooding; in July, an accident occurred at Chile's El Teniente mine; in early October, social unrest in Peru halted operations at the Constancia mine. Last month, Hudbay Minerals disclosed that due to ongoing civil unrest, the concentrator at its Constancia mine in Peru was shut down.

Beyond the supply side, a strong narrative about future demand is also providing support for the bulls. Goldman Sachs analysts Lina Thomas and Daan Struyven pointed out in a recent report that as AI and geopolitical tensions rise, the power grid is becoming the “weak link in energy security”, with copper as the key—“Copper is the new oil.”

Analysts note that whether to support the enormous power needs of AI data centers or to upgrade national power grids, all require vast amounts of copper. Goldman Sachs expects that by the end of this decade, the construction of global power grids and electricity infrastructure will account for about 60% of incremental global copper demand. Based on this, they predict copper prices will reach $10,750/ton by 2027.

Fragile Rally: "No China, No Perfect Bull Market"

According to Bloomberg columnist Javier Blas, there are two types of copper bull markets: “Good bull markets” driven by strong demand tend to be more durable, while “bad bull markets” driven by supply shocks are usually short-lived. The current copper market clearly belongs to the latter.

China, as the world's largest copper consumer, purchases about half of global copper output. Its demand growth is crucial for sustaining a copper bull market. But for now, China is not making large purchases. In addition, trade tensions are also impacting copper consumption for exported products such as electrical appliances.

From a market indicator perspective, the premium for bonded copper at the Shanghai warehouses, which reflects the health of the Asian market, now hovers around $50/ton, below the 2020-2025 average of about $60.5.

Long-Term Outlook Still Depends on Demand Growth

Overall, the foundation for the current copper price rally is not solid. Javier Blas explicitly points out in his analysis that bull markets driven by supply shocks are often short-lived. He believes that although the supply loss at Grasberg is significant enough to potentially push copper prices up to $12,000/ton over the next six months (to curb demand), this does not signal the start of a multi-year bull market.

The market should also watch for potential supply recoveries. For example, Panama’s Cobre Panama copper mine, closed since November 2023 due to legal disputes and accounting for around 1.5% of global supply, has seen the new Panamanian government express willingness to discuss its potential reopening. Should production resume, it would offset many of the smaller mine supply disruptions. Furthermore, new projects from the DRC, Chile, and Mongolia are expected to come online by 2026.

As for the long-term demand from the energy transition—refined copper consumption is projected to double to 50 million tons by 2035—this is more an outlook for 2030 and beyond, not a 2025 market reality. For investors, although copper is at historical highs, whether a truly sustainable bull market has arrived depends on when demand growth accelerates, not on hoping for ongoing supply shortages.

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