Copper prices hit fresh record highs this week, driven by two dominant forces: China’s shift toward stronger economic support and rising expectations that the US Federal Reserve will begin cutting interest rates soon. Together, these factors have pushed investors toward the metal, while simultaneously amplifying concerns about a potential supply deficit by 2026.

On the London Metal Exchange, the benchmark three-month copper contract touched $11,771 per ton, while Shanghai contracts climbed toward 93,300 yuan per ton. Futures in New York and Mumbai moved in the same direction, underscoring the global breadth of the rally.

China’s push for growth ignites copper’s surge

The latest rally began after a key meeting in Beijing, where Chinese leaders declared that supporting economic growth would be the top priority for 2026, pledging a “more proactive” fiscal stance and a “moderately accommodative” monetary policy. Investors interpreted this as a clear signal of renewed stimulus.

A significant portion of this spending is expected to flow into upgrades of power grids, renewable energy systems, data centers, and high-performance computing—sectors that consume vast amounts of copper.

Stronger Chinese trade data added to the momentum, with exports rising in November and pushing the annual trade surplus above $1 trillion for the first time. Shanghai copper finished the session up about 1.5%, setting a new closing record.

Long-term trends are reinforcing the optimism. The International Energy Agency expects refined copper consumption to reach 33 million tons by 2035 and 37 million tons by 2050, compared with around 27 million tons in 2024, suggesting that structural shortages may emerge in the years ahead.

US rate cuts add more fuel to the rally

Monetary expectations have also played a crucial role. The Federal Reserve on Wednesday cut interest rates by 25 basis points.

Rate cuts typically weaken the US dollar, making dollar-denominated commodities such as copper cheaper for global buyers. At the same time, concerns that the US might impose tariffs on refined copper have prompted American buyers to accelerate stockpiling.

Withdrawals from LME warehouses continue to rise, while US Comex inventories have reached record levels. Outside the US, however, supply tightness is worsening.

Chinese smelters plan to cut refined copper output by roughly 10% due to falling treatment charges and a shortage of concentrate supply. Analysts at GF Futures and Citic Securities warn of a potential 450,000-ton deficit by 2026. Citic also expects the market to require average prices above $12,000 per ton in 2026 to stimulate new mining investment.

Supply strains in Chile and Peru heighten market pressure

Copper supply remains under visible stress. Production disruptions in Chile and Peru—which together provide nearly 40% of global mined copper—have slowed output. Several mines are facing declining ore grades, water shortages, and delays in government approvals.

Data from the International Copper Study Group (ICSG) shows that global refined copper supply grew just 1% in 2024, while mine output rose by less than 2%, highlighting the sluggish pace of new supply.

These constraints have increased attention on future projects, including early-stage developments by Filo Corp in Argentina, Ivanhoe Electric in the US, and Hudbay’s Copper World project in Arizona. Although still years away, they form an important part of the long-term supply outlook.

Market outlook: sharp volatility ahead in 2026

Copper markets are bracing for a period of heightened volatility. Even with prices at record levels, the underlying drivers remain fragile.

LME inventories have fallen to extremely low levels compared with the past decade, while demand from key industrial sectors remains strong. This leaves the market vulnerable to abrupt price swings from even minor shifts in supply or demand.

Analysts warn that conditions in 2026 could be even tighter, as demand surges from electric vehicles, renewable energy systems, power-grid expansion, and data-center construction. A single electric vehicle can use up to four times the copper required for a gasoline-powered car.

Solar and wind installations require large amounts of copper-intensive wiring and transformers, while AI data centers and cloud-computing infrastructure are becoming a rapidly growing source of demand.

On the supply side, growth remains too slow. Many mines in Chile and Peru are facing declining ore quality, requiring more rock to be processed to produce the same amount of metal.

Environmental regulations, community-approval hurdles, and water scarcity have also delayed new projects, making supply responses to demand shocks increasingly difficult.

Financial conditions add another layer of risk, as additional US rate cuts or a weaker dollar could attract more investment into copper, while a global slowdown or weaker Chinese demand could trigger sharp price corrections.

Many analysts expect copper to be one of the most volatile commodities through 2026, given strong long-term demand and fragile short-term market conditions.

Research forecasts indicate that the refined copper market will remain in deficit for several years. J.P. Morgan projects a 330,000-ton deficit in 2026, with prices reaching around $12,500 per ton in the second quarter of 2026 and an annual average near $12,075.

The bank sees rising demand—especially from data centers, electrification, and power-grid modernization—providing major upward support, while tight supply and low inventories maintain price pressures.

Meanwhile, ICSG data shows only modest growth in mine and refined-copper supply, pointing to a structurally tight market even if prices ease slightly from current highs.

Copper enters a new phase

Copper’s surge to record highs is not a short-term phenomenon. China’s new stimulus plans, the prospect of further US rate cuts, and persistent supply problems in major producing countries are all propelling the market upward simultaneously.

With inventories low and project development slow, the market has entered a period of sustained tension.

Given copper’s importance to clean energy, electrification, and digital infrastructure, demand is likely to continue expanding in the years ahead. As a result, today’s tight conditions may persist well into 2026 and beyond.

During US trading, December copper futures rose 1.6% to $5.43 per pound as of 14:57 GMT.

Bitcoin (BTC-USD) and Ether (ETH-USD) declined on Thursday despite the Federal Reserve’s interest-rate cut, as Fed Chair Jerome Powell signaled that the central bank will proceed cautiously through 2026.

The Fed on Wednesday lowered the benchmark interest rate by 25 basis points to a range between 3.50% and 3.75%. Although widely expected, the 9–3 split within the FOMC and Powell’s hawkish tone at the press conference weighed on sentiment across digital-asset markets. One member called for a deeper 50-basis-point cut, while two members opposed any reduction at all.

Bitcoin (BTC-USD) fell more than 3% on Thursday, briefly dipping below the 90,000-dollar level before stabilizing around $90,030 at the time of writing. The decline came despite strong inflows into US spot Bitcoin ETFs over the past week.

Ether (ETH-USD) dropped 4% to below $3,200, while XRP (XRP-USD) slid more than 4% as it attempted to hold the $2.00 handle.

Derivatives markets also saw heavy losses, with liquidations totaling $440 million in the hours following Wednesday’s Fed decision, according to Coinglass. Long positions accounted for $334.8 million of the wipeout, while short positions totaled $105 million amid rising volatility.

Fabian Dori, Chief Investment Officer at Sygnum Bank, told Yahoo Finance that crypto markets remain highly sensitive to macroeconomic signals.

He said: “The 25-basis-point cut was largely priced in, but the accompanying narrative matters more for investors navigating an extremely volatile year-end. A hawkish cut isn’t surprising given the Fed’s concern over a cooling labor market and persistently elevated inflation.”

Dori noted that broader economic conditions still support long-term adoption of digital assets. “Liquidity conditions are expected to improve gradually through 2026, and business-cycle indicators continue to show fundamental momentum.”

He added that Bitcoin’s (BTC-USD) recent trading range and market sentiment suggest that much of the leverage washout has already occurred. “On-chain fundamentals, institutional allocation frameworks, and regulatory developments continue to provide medium-term tailwinds. Confidence is the key variable now.”

Fed in a “neutral zone” after three cuts

Powell’s press conference after Wednesday’s FOMC meeting struck a slightly dovish tone, while emphasizing continued caution around inflation risks and labor-market dynamics.

He said the 75-basis-point cumulative cuts since September have placed monetary policy “within the neutral zone,” adding that the central bank is “in a good position to wait and observe how the economy evolves.”

Powell described Wednesday’s rate reduction as “a difficult decision,” saying that “arguments could have been made on either side.” He noted that the gradual cooling of the labor market justified the latest cut.

He added that a substantial amount of new data will arrive before the January meeting, which will inform future policy choices.

The Fed’s projections show that policymakers anticipate only one more cut in 2026 following December’s decision.

Oil prices fell on Thursday as investors shifted their focus back toward peace talks between Russia and Ukraine, while also weighing the potential fallout from the United States seizing a sanctions-hit oil tanker off the coast of Venezuela.

Brent crude futures dropped 81 cents, or 1.3%, to $61.40 a barrel by 09:04 GMT, while US West Texas Intermediate fell 78 cents, also 1.3%, to $57.68.

Russian Foreign Minister Sergei Lavrov said Thursday that US envoy Steve Witkoff’s visit to Moscow this month had resolved a misunderstanding between the two countries, adding that Moscow had delivered its proposals to Washington regarding collective security guarantees.

The benchmarks had closed higher the previous session after the United States said it had seized an oil tanker off Venezuela, reigniting concerns over supply disruptions amid rising tensions between the two countries.

Amrile Jamil, senior oil analyst at LSEG, said that so far the impact of the seizure has not spilled over into the market, but any further escalation would trigger sharp volatility in crude prices. He added that the market remains focused on developments in the Russia-Ukraine peace process.

US President Donald Trump said Wednesday: “We just seized a tanker off the coast of Venezuela — a big tanker, very big — the biggest ever, actually. And other things are happening.”

US officials did not disclose the vessel’s name, but UK-based Vanguard, a maritime risk firm, said the tanker Skipper is believed to have been detained off Venezuela.

Traders and industry sources said Asian buyers are demanding steep discounts on Venezuelan crude, pressured by inflows of sanctioned oil from Russia and Iran, as well as rising loading risks in Venezuela amid a larger US military presence in the Caribbean.

Investors were also focused on the Russia-Ukraine peace talks, as leaders of the UK, France, and Germany held a call with Trump to discuss Washington’s latest efforts to broker a settlement — which they described as a “critical moment” in the process.

A source in Ukraine’s security service (SBU) told Reuters Thursday that Ukrainian drones struck a Russian oil platform in the Caspian Sea for the first time, halting oil and gas extraction at the facility.

Meanwhile, the International Energy Agency raised its forecast for global oil demand growth in 2026 and lowered its expectations for supply growth in its monthly report on Thursday, pointing to a slightly narrower surplus next year.

In other developments, the Federal Reserve — sharply divided — cut its policy rate again. Lower interest rates can reduce borrowing costs for consumers and support economic growth, which in turn can boost oil demand.

The dollar found support on Thursday from broad risk aversion in global markets, but it failed to recover its late-Wednesday losses against peers such as the euro, yen, and sterling, after the Federal Reserve delivered guidance that was less hawkish than some investors had expected.

Asian investors moved out of high-risk assets — including equities and cryptocurrencies — after disappointing results from US cloud-computing firm Oracle (ORCL.N), reigniting concerns that soaring AI-infrastructure costs may outpace the ability to generate profits.

This helped slow the dollar’s decline, which had initially come under pressure following remarks from Fed Chair Jerome Powell that surprised investors who were positioned for a more hawkish tone.

Even so, the wave of risk-driven selling eased somewhat in Europe. The euro traded at $1.1704, steady on the day near a two-month high after gaining 0.6 percent on Wednesday. Sterling also held its ground at $1.13374 after a 0.65 percent rise the previous day.

The dollar weakened further against the yen, slipping 0.14 percent to ¥155.8 after a 0.56 percent drop on Wednesday.

The Fed cut interest rates by 25 basis points on Wednesday, but with the move broadly expected, market reactions reflected the tone of the guidance and the division within the policy committee.

Chris Turner, head of global markets at ING, said investors had been preparing for a “hawkish cut,” but only two members opposed the decision, and the Fed maintained just one rate cut in its median projection for 2026.

He added that Powell also appeared reluctant to endorse the view that the Fed is already in “pause mode.”

Before the meeting, traders were debating whether they might receive a signal similar to those from the Reserve Bank of Australia governor or a key policymaker at the European Central Bank, both of whom suggested the next move could be a hike.

Pressure on the dollar also grew after investors moved into US Treasuries. The Fed announced it will begin purchasing short-term government bills starting 12 December to help manage market liquidity, with the first round expected to include about $40 billion in Treasury bills.

Pressure on the Australian dollar and cryptocurrencies

While major currencies remained focused on the Fed, risk-sensitive assets continued to track weakness in technology shares.

Bitcoin — often viewed as a barometer of risk appetite — briefly slipped below $90,000 and was last down 2.4 percent. Ether dropped more than 4 percent to $3,200.

Gracy Li, CEO of OKX in Singapore, said the decline in cryptocurrencies reflected continued deleveraging since October. “Even with a more accommodative Fed stance, the market is still unwinding excess leverage, so reactions to economic signals are slower than usual,” she noted.

She added that a 25-basis-point rate cut had already been priced in and that the broader economic and geopolitical backdrop remains uncertain, limiting immediate upside.

The Australian dollar also weakened alongside the pullback in risk appetite, dropping 0.5 percent to $0.6644. Pressure increased after data showed Australian employment in November recorded its largest decline in nine months.

Swiss franc rises after SNB decision

The Swiss franc edged higher after the Swiss National Bank kept its policy rate unchanged at 0 percent. The bank said the recent agreement to scale back US tariffs on Swiss goods had improved the economic outlook, even as inflation came in below expectations.

The franc last traded at 0.7992 per dollar after touching its strongest level in nearly a month, and at 0.9348 against the euro.