Copper’s Record-Breaking Rally: What Is Driving the Metal’s 52% Surge?

Key Moments

Three Main Forces Behind the Copper Price Spike

Copper prices have moved sharply higher over the past year, climbing from about $8,700 per tonne in early 2025 to an all-time peak above $13,000 in January 2026. That 52% jump has pushed the market well beyond historical price levels.

Bernstein analyst Bob Brackett attributes this move to a combination of physical market tightness, financial positioning, and policy-related drivers that together have propelled prices to these elevated levels.

Disruptions at Key Mines Tighten Physical Supply

On the physical side, Brackett points to operational problems at major copper-producing assets as one contributor to the rally. He highlights issues at Kamoa-Kakula and Grasberg among the supply disruptions that have helped tighten availability and support higher prices over the past year.

Speculative Positioning Adds Financial Momentum

A second support for copper has come from the financial side of the market. Brackett observes that net futures positions are “currently at elevated levels,” indicating that speculative activity has increased. This heightened positioning has added a layer of financial momentum on top of the underlying supply-demand fundamentals.

U.S. Inventory Stockpiling Ahead of Possible Tariffs

Brackett identifies additional demand from U.S. inventory building as the most significant driver of the recent price performance. Traders have been accumulating copper in anticipation of potential U.S. tariffs on refined copper, which are expected to be 15% from January 2027 and could rise 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.”

Pricing and Inventory Dynamics

Tariff Scenarios and Bernstein’s Base-Case View

Bernstein outlines four possible tariff outcomes that could influence copper’s path in the coming years. Its base-case assumption is that there will be no tariffs on refined copper.

Brackett questions the logic of proposed 15% and 30% levies, noting that the U.S. imports roughly half of its copper and that more than 90% of those imports originate from Chile, Canada, and Peru. He estimates that a 15% tariff would increase the U.S. import bill by about $1.35 billion.

He also points out that global smelting capacity is already in oversupply and that current economics are weak, which he argues makes large-scale new smelting investments in the U.S. unlikely.

Potential Chile Deal as an Alternative to Broad Tariffs

Instead of across-the-board tariffs on refined copper, Bernstein’s note highlights a potential copper agreement with Chile as a more feasible way for the U.S. to secure supply.

Brackett suggests that exempting Chilean copper from tariffs could close the price gap between the London Metal Exchange (LME) and Comex. Under such a scenario, U.S. buyers would no longer have an incentive to pay the current premiums if they could access tariff-free imports.

Chile produced about 5.5 million tonnes of copper in 2024 and has more than one million tonnes of smelting capacity. Bernstein states that this level of smelting capacity would be enough to meet U.S. requirements.

Valuation Stretch and Historical Return Patterns

Brackett underscores that copper is now trading at a substantial premium compared to marginal production costs. With inventories standing at roughly nine days of demand, Bernstein estimates that current prices are about 121% above marginal cost.

The note indicates that, historically, purchasing copper when it trades at such high premiums to marginal cost has led to negative average long-term returns, in line with Bernstein’s margin-reversion framework. However, it also notes that short-term price gains can still occur even when valuations appear stretched.