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Copper ended Thursday down 1.5% from the previous close and May futures were at 5.47 a pound, or just over $12,000 a ton. Copper has given up more than 16%, or $2,400 per ton, from its all-time high reached at the end of January, one day before the Iran war began.
In a new analysis from Macquarie Strategy, the bank explained 11 analystAnalysts in locations such as Geneva, Houston, London, Shanghai and Singapore argue that copper’s extraordinary rally since December was not related to fundamentals and was largely driven by investor flows into the base metal. Futures trading volumes on the Shanghai Base Metals Exchange in January were up 80% compared to December, for example.
Macquarie also notes that total open interest in copper futures in New York, London and Shanghai swelled by $9.5 billion during December and January before reversing course, with a decline of $24.6 billion during February and March accompanying the price correction.
In Macquarie’s view, the rally has left the market “overpriced, oversupplied and in a state of surplus”, with little evidence of real physical supply tightness.
Global visible inventories rose sharply, increasing by more than 1 million tons since the start of 2025. Inventories on the London Metal Exchange rose to their highest levels in six years, while inventories on the COMEX reached unprecedented levels. The bank also estimates that there is another 480,000 tons of copper sitting OTC in the US, driven by arbitrage opportunities between CME and LME pricing.
So much excess metal has accumulated in the United States, creating what Macquarie describes as an artificial sense of scarcity elsewhere. Arab Trade – COMEX premiums reached unprecedented levels of over $2,000 per ton in December and January, but have now compressed to more historic levels.
However, arbitrage on the Chicago Mercantile Exchange and the London Metal Exchange continues to pull metals into the US, Macquarie says, as traders eye a potential Section 232 decision on copper imports, expected by June 30, 2026. While recent developments in critical metals policy in the US may have reduced the likelihood of tariffs being imposed, Macquarie warns that the outcome remains uncertain and continues to impact trade flows.
As prices decline, Chinese consumers are starting to return, with a notable decline in inventories reported in the latest week. But outside China, demand remains weak. Spot premia are well below contract levels, and there is limited appetite for physical metals, suggesting that higher prices have depressed consumption in all major regions.
This weak demand backdrop comes even as supply continues to increase, reinforcing Macquarie’s estimates that the market already had a surplus of approximately 602,000 tonnes last year.
Macro factors are likely to remain the dominant driver of prices in the near term. The bank expects copper to trade with extreme volatility, influenced more by investor positions and geopolitical developments than by underlying supply and demand.
Resolving Iran-related tensions could provide short-term support, but these gains are likely to be driven by sentiment rather than rooted in fundamentals.
Ultimately, Macquarie sees increasing downside risks. With more than a million tonnes of visible stocks built up since the start of 2025 and expectations of further surpluses, the bank warns that the market lacks fundamental support at current price levels.
The recent pullback may be an early signal that the copper rally has run out of steam, leaving prices vulnerable to a deeper correction as the year progresses.
