LME copper prices hit a record high! Tariff arbitrage and favorable supply-demand dynamics resonate: As AI demand becomes the "new engine," Chilean export volume falls to a one-year low

According to Zhitong Finance APP, driven by expectations that U.S. President Donald Trump will expand tariffs on the import of refined metals, copper prices have seen several consecutive weeks of gains on the London Metal Exchange (LME), ultimately reaching a record high. The benchmark three-month LME futures price once rose by 0.8% to $14,533 per ton, breaking the previous record set in January before pulling back slightly.

Since the beginning of this year, copper prices have risen by 17%, and in the past 12 months, they have surged by 47%. This is mainly due to the long-term imbalance between supply and demand. Aging large-scale copper mines worldwide struggle to meet the copper needs of data centers, renewable energy, and power grids—a reality the copper bulls have been highlighting for years.

However, short-term factors have become prominent—particularly the shipment of hundreds of thousands of tons of copper to the United States this year as traders seek to profit from higher U.S. copper prices. Although the U.S. Department of Commerce was initially scheduled two months ago to submit a report to the White House with recommendations on the necessity of imposing tariffs, the market is still digesting the potential for tariffs on raw copper imports.

Tariffs Drive Copper Prices Higher

Although global inventories remain relatively high, copper stockpiles within the LME’s vast global network have decreased and are now highly concentrated in the United States. This has led to a short-term supply squeeze, putting pressure on short positions, and has pushed prices to new historical highs even amid weak demand.

Cristián Cifuentes, senior analyst at Chilean copper think tank Cesco, said: “This is more about metal being shifted around because of tariffs than an actual surplus of final demand. This is a localized shortage, not a global demand surplus.”

Despite subdued trading conditions due to the U.S. exchanges being closed for Labor Day, which weakened risk appetite in financial markets, copper prices in London still climbed on Monday.

Even in the face of growing macroeconomic and geopolitical headwinds, such as the war in Iran and surging U.S. borrowing costs—which will put immense pressure on global capital-intensive manufacturers—copper prices are still climbing. High prices themselves may threaten copper demand, as buyers seek substitutes; but so far, these demand-side pressures have had limited impact on copper’s rally.

U.S. Copper Imports Hit Record High Primarily Due to Persistent Premiums for Comex Copper Futures. Since President Trump first officially proposed copper tariffs last February, this has created a massive arbitrage opportunity for traders.

The tariff trade has put severe pressure on global inventories, with LME copper stocks dropping sharply last month, driving exchange inventories that support copper contracts to extremely low levels and further tightening supply. Although new deliveries have relieved some pressure, spot prices remain well above LME three-month futures prices. This “spot premium” phenomenon indicates that demand exceeds supply.

AI and Energy Transition: Copper's "Structural Demand" Is Reconstructing the Long-term Logic

The long-term narrative for rising copper prices has not changed. The advancement of artificial intelligence and the rapid construction of data centers are current major drivers of copper demand growth. The demand for copper from AI extends far beyond the internal wiring and cables of data centers—data centers consume massive amounts of electricity, meaning the market also needs new generation capacity, transmission lines, substations, transformers, and broader power grid upgrades.

According to industry estimates, a 1 GW computing power data center uses 2.5 times more copper than a traditional data center. In 2026 alone, the construction of global computing power clusters is expected to add nearly 400,000 tons of copper demand. Other institutions estimate that the incremental copper demand brought by global computing power expansion in 2026 will be about 475,000 tons. The growth of electric vehicles and renewable energy is also further boosting copper demand—solar installations, wind farms, and battery storage projects all require significant amounts of copper.

The key is that nearly every link in the electrification process relies heavily on copper. Globally, large mines are generally facing declining ore grades, aging equipment, and rising operational costs, while new projects are constrained by long exploration, permitting, and construction cycles.

Mining Giants Become the Biggest Winners

The surge in copper prices is undoubtedly a major boon for the world’s biggest mining companies, which have long sought to boost their holdings of a metal heading into a period of booming long-term demand. Rio Tinto (RIO.US), BHP (BHP.US), Glencore, and Zijin Mining all reported substantial profit increases in their latest earnings, primarily thanks to strong performance from their copper businesses.

Rio Tinto's copper segment posted an 84% year-on-year growth in EBITDA in the first half of 2026, reaching $5.7 billion, with free cash flow surging 325%. By contrast, EBITDA for the group’s iron ore business—the largest profit source—fell 1% year-on-year. Copper, aluminum, and lithium together now account for more than half of Rio Tinto’s EBITA.

Copper Exports from World’s Largest Producer Chile Drops to Lowest Point in a Year

Nevertheless, several major mining companies are still facing operational challenges this year. Data released Monday show that despite surging copper prices, copper export revenues from Chile—the world’s largest producer—fell to their lowest level in over a year in August, following severe winter storms and mine accidents. Unless Chile’s copper production recovers in the second half, global copper mine supply will see its first annual decline since 2017.

According to figures released on Monday, Chile’s copper exports last month reached $4.62 billion, down 14% from July and 3.2% year-on-year. This represents the lowest monthly total since July 2025. Despite strong copper prices—average prices in August were up more than 40% year-on-year—export revenue still declined.

Chile’s mining sector faced operational setbacks this year, with heavy rainfall, snowstorms, and strong winds in July and August, resulting in mine shutdowns, and rough sea conditions frequently limiting port activity. Production difficulties in a country that accounts for a quarter of global copper output are supporting copper prices and intensifying the already tight global supply situation due to disruptions in other regions.

Extreme weather is amplifying supply risks further. Antofagasta and Lundin Mining have each lowered their 2026 production guidance ranges to 625,000 to 655,000 tons and 300,000 to 325,000 tons, respectively. According to the International Copper Study Group (ICSG), global copper mine output fell by 1.1% year-on-year in the first half of 2026, with industry giants Codelco and Freeport-McMoRan both posting double-digit declines in output.

Morgan Stanley has revised its previous growth forecasts to flat or even a slight decrease—meaning global annual copper mine production may fall for the first time since 2017.

Michael Cuoco, head of metals at StoneX Financial Inc., wrote that robust demand growth combined with supply challenges “should create a tighter supply-demand balance in the future, supporting higher prices.”