Iran's two major copper smelters suspected to have halted production, adding new uncertainties to Middle Eastern supply.

As tensions in the Middle East continue to escalate, the global copper market is facing a dual squeeze from supply shocks and demand concerns.

On Tuesday, June 7, Eastern Time, media reports citing satellite data organization Earth-i said that two of Iran’s main copper smelters appear to have recently shut down production. The agency monitors multi-dimensional data such as thermal signals, emission changes, inventory fluctuations, and vehicle activity, showing that industrial activity at the relevant smelters has significantly dropped to low levels.

Among them, Iran’s largest copper smelter, Sar Chesmeh, has been offline since Saturday, March 28; another state-owned smelter, Khatoon Abad, also stopped production last weekend.

The combined annual capacity of these two smelters exceeds 370,000 tons, serving as the core pillars of Iran’s copper processing system. Sar Chesmeh’s annual capacity is over 250,000 tons, while Khatoon Abad produces about 120,000 tons of copper per year. Not only do they determine Iran’s refined copper supply capabilities, but they also play an important supplementary role in regional trade.

The satellite data reveals typical “systematic shutdown” characteristics: persistent heat sources disappear, emissions decline, and transportation activities stagnate. This usually indicates the production chain has suffered an external impact rather than a short-term equipment overhaul.

Recently, various industrial assets, including steel plants and oil and gas facilities, have frequently been affected by the conflict, showing geopolitical risks have expanded from the energy sector to a broader industrial system. The suspected shutdown of Iran’s two major copper smelters marks that Middle East geopolitical tensions are further deepening the impact on metal supply chains.

Considering recent developments, unstable electricity supply, transportation disruptions, and rising security risks could all be direct causes of smelter shutdowns. Copper smelting is high energy-consuming and continuous. Once interrupted, the recovery period is long and expensive, and supply impacts are often lagged and amplified.

Market analysts believe that compared to oil and gas facilities, metal smelting industries rely even more on stable operating conditions. If the power grid, logistics, or safety deteriorate, companies are often forced to “shut down immediately,” making supply shocks more sudden and unpredictable.

Iran, as an important resource processing hub in the Middle East, its industrial system being disrupted will further disturb regional commodity flow routes.

Goldman Sachs: Energy Shock May Suppress Demand—Copper Prices Face Downside Risk

In contrast to supply disruptions, the demand side is facing macroeconomic pressure.

According to a recent Goldman Sachs report, amid surging oil and gas prices, global economic growth faces downside risks, thus weakening industrial metals demand. The report notes that if shipping through the Strait of Hormuz remains obstructed, energy prices will stay high, dragging down the global economy and suppressing copper demand, putting short-term risks to the downside.

Goldman Sachs believes current copper prices are not fully supported by fundamentals. If macro expectations deteriorate or market risk-off sentiment intensifies, prices may weaken further.

Goldman’s baseline scenario predicts that shipping through the Strait of Hormuz will resume from mid-April, but their analysts point out that current copper prices are much higher than their estimated fair value of around $11,100 per ton.

Data show that since February 28, when the U.S. and Israel launched military strikes on Iran, copper prices have fallen more than 7%, reflecting growing market concerns about the demand outlook.

At the same time, Goldman slightly lowered its average copper price forecast for this year, stating that in “severely adverse scenarios,” the supporting effect of strategic inventory and tight balance may weaken.

Commentary suggests that the copper market is now showing a classic supply bullish versus demand bearish tug-of-war. On one hand, the shutdown of Iran’s smelters and rising geopolitical risks inject supply uncertainty premiums into the market; on the other, soaring energy prices suppress economic activity, weaken demand expectations, and weigh on prices.

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