Fuelled by expectations that the demand for copper—a key metal in electrification—will exceed supply, the metal is set to record its largest annual gain since 2009.
Copper, often referred to as the “red metal,” has seen a remarkable rally on the London Metal Exchange this year, surging by over 40% and hitting a series of all-time highs in a late-year climb.
This performance solidifies its position as the top performer among the six industrial metals traded on the exchange.
On the LME, the three-month copper contract declined on the last trading day of 2025.
At the time of writing, the copper contract was at $12,410 per ton, down 1.8% from the previous close.
The copper market outside the US is becoming tighter as traders expedite shipments to America, driven by the prospect of impending tariffs, according to a Bloomberg report.
Gold-to-copper value down
Furthermore, copper’s attractiveness as an industrial metal has been heightened by a depreciation of the US dollar, which reduces the cost of commodities for international buyers, and significant price surges in precious metals like gold and silver, the news agency said.
The gold-to-copper ratio has fallen to an all-time low, suggesting that copper is undervalued relative to gold.
Analysts at China Securities Co, led by Zhou Junzhi, project a significant rally for copper in 2026, driven by the same macroeconomic factors currently propelling the gold market, according to the report.
Key drivers for this anticipated copper surge include a projected easing of monetary policy by the Federal Reserve.
Lower interest rates typically stimulate economic activity and construction, increasing demand for the industrial metal.
Furthermore, a boom in technology sectors, which are heavily reliant on copper for wiring and components, is expected to boost consumption.
The reshaping of global supply chains, partly as a response to US tariffs, will also contribute to bullish demand for the “red metal.” These combined forces are set to close the valuation gap, making copper an attractive investment for the coming year.
Shortfall in copper ores
Meanwhile, the primary factor driving the copper price surge is the anticipated shortfall of copper ores. This is due to a less dynamic growth in mine production over recent years, which now faces the risk of being outpaced by demand.
Unexpected production cuts have intensified these concerns.
For example, public protests forced the shutdown of Panama’s largest mine.
The situation has been further complicated by additional production disruptions stemming from accidents and protests in Chile and Peru, which are globally the two most significant mining nations.
The most compelling evidence of a raw material shortage is the change in treatment and refining charges (TCRCs) that mining companies pay copper smelters for processing ore, according to a Commerzbank AG report.
These fees turned negative earlier this year in China, the world’s leading copper producer, the German bank said.
This negative territory means that Chinese copper smelters are now paying mining companies to secure copper ores, signaling a scarcity.
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