Copper Market Under Pressure from Energy Costs and Trade Policy Fears

Copper slumps to a three-month low as soaring energy costs, a strong dollar, and record LME stockpiles pressure prices, while greenflation impacts global industry.

Copper prices have slumped to a three-month low, recording their most severe weekly decline in a year. A confluence of soaring energy costs, a robust U.S. dollar, and swelling stockpiles is exerting significant downward pressure on this critical industrial metal.

Record Inventories Signal Caution

Stockpiles monitored by the London Metal Exchange (LME) have surged to more than 342,350 tonnes, reaching their highest level in approximately six and a half years. Market analysts attribute this substantial inflow largely to preemptive moves against potential trade barriers. Significant storage activity in the United States is widely seen as a hedge against looming import tariffs on refined copper. Financial institution Goldman Sachs forecasts tariffs could reach 15 percent by mid-2026, a prospect already prompting a cautious stance among market participants.

Industrial Repercussions Emerge

The effects of high costs, sometimes termed "greenflation," are becoming evident across the real economy. In China, smelters have already reduced output by over ten percent this year. Elevated raw material expenses and fragile supply chains are also delaying major infrastructure initiatives, including wind farm projects, and squeezing profitability in the electric vehicle sector. While mining firms are making long-term investments to expand capacity in Chile, partly to meet demand from AI data centers, near-term conditions remain strained.

Geopolitics Fuels an Energy Price Shock

Recent instability in the Persian Gulf has triggered sharp increases in the price of oil and natural gas. This development has stoked fears of a broader inflationary wave that could dampen global economic growth and, by extension, industrial demand for copper. Compounding the issue, the restrictive interest rate policy of the U.S. Federal Reserve continues to bolster the dollar. As copper is traded internationally in U.S. currency, a stronger greenback makes the metal more expensive for buyers outside the dollar zone, further suppressing worldwide demand.

Despite the recent price retreat to $5.30 per pound on Friday, a structural supply deficit persists, fueled by mine closures in Panama and Indonesia. Investors are now looking ahead to U.S. tariff decisions expected in mid-2026, which are poised to dictate the next phase of dynamics for the physical copper market.