Copper tightness, tariffs set up volatile 2026

Copper’s record-breaking 2025 has set up a tight but fragile market for 2026 as supply strains deepen and tariff fears distort trade flows.

On the London Metal Exchange, copper rose nearly 40% for the year, its largest annual gain since 2009. Prices topped $11,800 (C$16,210) per tonne as traders rushed metal into the United States ahead of possible Trump administration tariffs of up to 15%, at one point sitting about 3% above any previous high.

Albert Mackenzie, an analyst at Benchmark Minerals, said the firm estimated by October there were 730,000 to 830,000 tonnes of “economically trapped” material in the U.S., swelling stocks held in CME Group–approved warehouses while tightening supply elsewhere and driving premiums sharply higher.

“We use the term ‘economically trapped’ to refer to that copper as the current arbitrage and premium environment means there is no incentive for that material to be removed from the U.S.,” Mackenzie said. “This trapped tonnage is almost certainly higher now as material continues to flow into the U.S.”

The long-term outlook remains bullish, Mackenzie said, but the present is complicated by trade policy and investor positioning. He said the rally drifted from fundamentals at times, driven as much by tariff hedging and an “EV, AI and energy transition” investment narrative as by genuine scarcity. Much of the diverted metal sits in storage and is leveraged against the CME forward curve rather than being consumed, he added. “Mining companies are pushing a compelling long-term shortage narrative – and the market believes it,” Mackenzie said. “But belief and fundamentals aren’t the same thing.”

Courtesy of Benchmark Minerals.

Underlying supply problems added pressure. Long disruptions at Grasberg in Indonesia, Kamoa-Kakula in the Democratic Republic of Congo and Chile’s El Teniente stretched through the year, with some mines not expected to regain 2024 output levels until 2027 or later. Even operations free of stoppages grappled with declining grades, complex geology or slow ramp-ups, leaving smelters squeezed by tight concentrate availability.

Setbacks at Teck’s (TSX: TECK.A, TECK.B; NYSE: TECK) QB2 project in Chile, and weaker-than-recent production at mines including Collahuasi and Los Bronces, added to the perception of disruption, Mackenzie said.

Strong on paper, softer on the ground

Demand growth looked strong on paper, anchored by EVs, grid upgrades, data centres and broader electrification. Near-term consumption lagged the narrative, particularly in China, where construction and parts of manufacturing stayed soft. High premiums pushed some buyers toward cheaper alternatives, though analysts said the market was tight rather than broken.

Courtesy of Benchmark Minerals.

Copper’s role as a macro barometer kept policy and sentiment in the driver’s seat. Prices jumped on hopes for better China-U.S. trade relations and shifted with stimulus expectations. Any new Trump-era tariffs on copper or copper-heavy appliances could jolt flows and demand, adding another layer of volatility across the LME–CME spread, analysts warn.

Substitution and scrap acted as safety valves. Engineers revisited aluminium in wiring when copper traded far above it, and high prices drew more scrap into circulation. While not frictionless, these pressures can cap rallies if demand starts to erode.

Looming structural gap

Longer term, analysts see deeper structural risks. BloombergNEF’s December Transition Metals Outlook 2025 warns copper demand for the energy transition could triple by 2045 and that the metal may enter structural deficit as early as 2026. Disruptions in Chile, Indonesia and Peru, along with slow permitting and a thin pipeline of new mines, compound the gap. Without major investment in new projects and recycling, the deficit could reach 19 million tonnes by 2050.

Courtesy of Benchmark Minerals

Kwasi Ampofo, head of metals and mining at BloombergNEF, told Mining.com earlier this month that the predicted imbalance reflects rising demand colliding with slow project delivery. “Copper, platinum and palladium have experienced very slow capacity addition at a time where demand is growing,” he said, calling them the commodities under the greatest near-term pressure.

Other critical minerals face constraints of their own. Aluminium growth is limited by China’s production cap, graphite demand is expected to climb toward a technical deficit by 2032 and cobalt prices have rebounded after the DRC replaced its export ban with a quota cutting shipments by half for 2026–27.

Lithium supply continues to expand, but prices remain far below their 2022 peak. Across producers, including Anglo American (LSE: AAL), BHP (NYSE, LSE, ASX: BHP), Glencore (LSE: GLEN), Rio Tinto (NYSE, LSE, ASX: RIO), Vale (NYSE: VALE) and Zijin Mining (HKEX: 2899), capital spending is rising as companies chase future supply.

What to watch in 2026

Taken together, 2025 revealed a copper market tighter than in previous cycles, but not yet in the structural shortage often advertised. Nearly one million tonnes of copper could be parked in U.S. warehouses without obvious physical shortages elsewhere, even at record prices. At the same time, constraints on new supply and the rising copper intensity of the global economy are real.

For 2026, observers expect more of the same: a market pulled between a genuinely bullish long-term story and a muddled near-term reality, with tariffs, trade policy and macro data driving sharp swings. In copper, the deficit may still be ahead, but the volatility is already here.

The key variables are trade flows into the U.S., recovery at major mines and the global economic outlook. If traders continue to divert hundreds of thousands of tonnes to CME-deliverable warehouses ahead of potential tariffs, tightness elsewhere will persist and premiums will remain elevated, analysts say. A tariff surprise could send prices swinging in either direction, while fresh disruptions or aggressive Chinese stimulus could quickly reshape balances. High prices are likely to persist but with deeper corrections if substitution and scrap accelerate.

“As long as Donald Trump remains in the White House, markets should brace for more sudden swings sparked by policy shifts or off-the-cuff remarks — effects that extend well beyond copper itself,” Mackenzie said.