Copper surges to record high: Unpacking the global drivers behind the rally

Copper, the industrial red metal, is making headlines in 2025 as prices in India and across global exchanges surge to record highs. On the Multi Commodity Exchange (MCX), copper futures recently touched ₹976.50/kg, marking a more than 20% rise year-to-date. Similar bullish momentum is evident in the London Metal Exchange (LME), where copper hovers near $10,000/tonne, and in the Shanghai Futures Exchange (SHFE), where prices have climbed over 8% this year.

This rally is not just a local phenomenon—it reflects a confluence of global economic, industrial, and geopolitical factors reshaping the copper market.

Why are copper prices surging in 2025?

The more than 20% surge in Indian copper prices this year is driven by a perfect storm of supply constraints and booming demand. Several key factors underpin this rally:

1. Green energy transition: Copper is indispensable in renewable energy systems, electric vehicles (EVs), and grid modernization. EVs require 2–4 times more copper than traditional vehicles, and solar and wind installations are copper-intensive.
   
   
2. Supply disruptions: Major mines like Freeport-McMoRan’s Grasberg in Indonesia have faced operational setbacks, prompting force majeure declarations. Ore grades are declining globally, and new mine development is slow, with lead times exceeding 15 years.
   
3. Tariff and trade policy shocks: The Trump administration’s 50% tariff on semi-finished copper products has disrupted global trade flows, prompting stockpiling and price premiums in the U.S. market.
   
4. Chinese stimulus and infrastructure push: China’s aggressive infrastructure spending and stimulus measures have boosted copper consumption, even as its property sector remains subdued.
   

Global supply and demand dynamics

The copper market in 2025 is characterized by tightening supply and robust demand. According to the International Copper Study Group (ICSG), global copper demand is projected to outpace supply this year. Asia accounts for nearly 74% of global copper consumption, with India and China leading the charge.

On the supply side, aging mines, declining ore grades, and regulatory hurdles are constraining output. Chile and Peru, which together produce over 40% of global copper, are grappling with environmental and labour challenges. Meanwhile, copper inventories at the LME have dropped by over 66% in the past year, underscoring the supply crunch.

Geopolitical tensions and tariff threats

Geopolitical developments have added volatility to copper prices. The U.S.-China trade tensions, coupled with new tariffs on copper imports from Latin America and Europe, have reshaped global supply chains. Traders rushed to front-load shipments ahead of tariff deadlines, leading to temporary inventory gluts in the U.S. and shortages elsewhere.

Middle East conflicts and energy price spikes have also impacted mining costs, especially in diesel-reliant operations in Chile and Africa. These disruptions have elevated copper’s risk premium, making it more sensitive to geopolitical headlines than ever before.

The role of U.S. Fed policy and dollar performance

Monetary policy has played a pivotal role in copper’s price trajectory. The U.S. Federal Reserve’s dovish stance and anticipated rate cuts have weakened the dollar, making copper cheaper for non-dollar buyers. Historically, copper prices tend to rise after the Fed rate cuts due to increased industrial activity and currency effects.

Demand to stay strong, supply to lag

Looking ahead, copper demand is expected to remain robust. The International Energy Agency (IEA) projects a 30% supply deficit by 2035 due to electrification and AI-driven infrastructure expansion. Data centres, EVs, and smart grids will be major copper consumers, with demand from AI-related technologies alone expected to grow sixfold by 2050.

However, supply challenges persist. Existing mines are aging, and new projects face long development timelines and environmental scrutiny. Even under optimistic scenarios, a significant supply gap is projected by 2030.

In India, copper demand is set to rise with the government’s push for renewable energy, EV adoption, and infrastructure modernization. Domestic manufacturers are ramping up capacity, but reliance on imports remains high, making the market vulnerable to global shocks.

Copper’s rally in 2025 is more than a cyclical upswing—it reflects a structural shift in global demand patterns amid constrained supply. From green energy to geopolitical tensions, multiple forces are converging to reshape the copper landscape. While short-term volatility may persist due to monetary policy and trade disruptions, the long-term outlook remains bullish, driven by the metal’s central role in the global energy transition.

(The author is, Head of Commodity Research, Geojit Investments Limited)