Copper Price Surge Signs Deeper Supply Squeeze
Copper prices have surged over 50% in the past year, and according to Jacob White of Sprott Asset Management, this is not a traditional commodities cycle. Instead, it's a structural squeeze caused by mine shortages colliding with rising demand from power grids, AI, and defense.
The metal has climbed to $14,545 per tonne, setting records despite mixed economic indicators. Chinese demand indicators remain mixed, but copper consumption is increasingly driven by electricity networks, AI data centers, defense systems, and energy infrastructure backed by government policy and national security priorities.
Supply constraints emerge across the copper value chain, with mine production undershooting expectations, treatment charges collapsing, and US tariff uncertainty redirecting refined metal into the country. Copper miners have gained 12.96% in August, while junior copper miners rose 15.06%, according to Sprott.
The concentrate squeeze is a major factor, with smelters competing for scarce material at record-low treatment charges. The balance of power has shifted decisively toward copper miners, who are benefiting from scarcity on both sides of the market. Smelters' revenues from sulphuric acid, gold, and silver by-products have allowed them to remain profitable and keep bidding aggressively for concentrate.
Tariffs are compounding the physical shortage by drawing refined copper into the US, reducing availability elsewhere. The Commerce Department recommended a universal tariff of 15% on refined copper beginning January 1, 2027, rising to 30% a year later. This has encouraged traders to move copper into the US before any levy takes effect.
Chile's weakening production outlook underscores the constraint, with declining ore grades and aging infrastructure limiting output. The industry needs new supply, but major copper mines can require 15-20 years to develop and substantial capital to build. Higher prices should eventually stimulate investment, but it may take time for net supply growth.
BHP estimates global copper consumption in data centers could increase sixfold, emerging as another long-term demand source with an effect extending well beyond the copper contained inside data centers.