Copper rises on AI boom, US imports and Middle East hopes

Copper analysis

The critical mineral has made a strong August start, aided by renewed hopes for a US-Iran deal after President Trump called off strikes and said the two sides are talking ^[1]. A successful outcome could normalise oil flows through the Strait of Hormuz, easing headwinds to economic activity and inflationary pressures.

On the supply side, disruptions to sulphur transit are creating tightness in copper markets. Sulphur is a byproduct of oil refining used to produce sulphuric acid, a key input in copper mining, with almost a quarter of global sulphur supply in 2025 coming from Middle Eastern countries ^[2]. Responding to the situation, China, another major producer, curbed sulphuric acid exports, exacerbating shortages. According to the IEA, over 15% of global primary copper output comes from SX-EW processes, which are directly dependent on sulphuric acid availability. ^[3]

Market tightness is being intensified by dislocations ahead of potential import levies by the United States, fuelling a surge in Comex stockpiles ^[4]. The Trump administration imposed tariffs of 50% on semi-finished products a year ago, excluding refined copper. However, the proclamation stated that levies on refined copper could begin from 2027 at a rate of 15%. ^[5]

These developments add to long-term demand drivers for copper and other commodities, from its use in the AI boom and semiconductors to the clean energy transition and the defence industry,Meta Platforms, Amazon, Microsoft and Alphabet reiterated their commitment to spending on the physical AI buildout, targeting combined capex of $720-$745 billion. The semiconductor market is projected to accelerate and reach $1.5 trillion according to WSTS. ^[6]

The clean energy transition is gathering pace, partly aided by the energy shock from the Middle East conflict, as underscored by renewed EV demand. The IEA forecasts a 28% increase in global electrified vehicle sales this year ^[7], while pure BEV sales in Europe jumped 51% in H1 according to ACEA ^[8], offering some relief to struggling legacy automakers.

At the same time, heightened geopolitical frictions are driving a defence supercycle. NATO has committed to raising investment to 5% of GDP by 2035 ^[9], the United States is targeting a record security budget and the Pentagon has requested emergency funding of $67 billion for the war. ^[10]

Copper faces a favorable technical and fundamental environment, which can push it to new all-time highs toward the $7 threshold. Still, the non-ferrous metal remains vulnerable to volatility and pullbacks below the EMA200 that could challenge the bullish outlook.

Geopolitical uncertainty lingers and even if the US-Iran conflict is resolved, transit through the Strait of Hormuz could take considerable time to normalise. The energy shock weighs on global economic activity while fuelling inflation, pushing central banks toward higher rates. Monetary tightening to contain price pressures, alongside trade disruptions as the US administration remains committed to tariffs, intensifies growth risks that weigh on copper consumption.

Despite long-term tailwinds from its use in crucial technologies driving the global economy, the supply-demand equilibrium is not straightforward. The ICSG expects demand growth of 1.6% this year to outstrip supply, though this is a downgrade from a previously higher forecast due to the Middle East conflict. ^[11]