Copper prices hit a record high, Goldman Sachs: Is the global market entering a "cyclical bull market"?

Copper prices are undergoing a price reconstruction driven by cross-market arbitrage due to the combined effects of U.S. tariff expectations and structural tensions in global supply. Goldman Sachs commodity experts warn that arbitrage trades based on tariff expectations are forming a self-reinforcing cycle of "inventory drawdown - spread widening - accelerated stockpiling," pushing global copper prices into historically high ranges.

London Metal Exchange (LME) copper futures have continued to rise after breaking through the Thanksgiving consolidation range, reaching new highs. Specific data shows that LME copper prices rose nearly 1% to USD 11,294.50 per ton; the New York Commodity Exchange (Comex) copper futures saw an increase of up to 1.6%. Traders are competing to bring copper into the U.S. to avoid potential tariffs from the Trump era, continuously driving up the price spread between the U.S. and Europe.

This arbitrage behavior exacerbates an already fragile supply-demand landscape. On one hand, global mine production is frequently disrupted, while on the other hand, U.S. import demand has surged, continuously drawing down spot inventories from other regions. Since the beginning of this year, LME copper prices have risen by 30%. Mercuria senior trader Kostas Bintas warned that if this trend continues, markets outside the U.S., especially in Asia, may soon face a substantial shortage of copper cathodes, triggering a new round of accelerated price increases.

Goldman Sachs Expert Interprets "Cyclical Rise" Mechanism

Goldman Sachs commodity expert James McGeoch defines the current market dynamics as a "cyclical rise." He pointed out that the continuous tightening of LME inventories, combined with active arbitrage trading in the U.S. COMEX market, has jointly strengthened the LME forward discount structure. This discount structure, in turn, further stimulates arbitrage behavior in the COMEX market, forming a self-reinforcing cycle of "inventory tightening - deepening discount - enhanced arbitrage." He stated:

I have been watching the LME copper price, and the USD 11,100 level has been touched three times; it feels like a spring ready to launch.

McGeoch further analyzed that the market has already turned its attention to a potential supply tightness that may occur in the first half of 2026. Currently, several major copper mines are facing production challenges, including supply constraints at the Grasberg mine, declining inventories at Kakalua, operational friction at Codelco, weak output at Collahuasi, and low extraction rates at the QB project.

Against this backdrop, the U.S. is attracting global inventory backflow under the guise of "strategic reserves" due to its tariff policy expectations. Traders are supporting this flow through their balance sheets, objectively exacerbating the tightness in the spot markets of other regions globally.

The U.S. Becomes the Dominant Force in the Copper Market

Nick Snowdon, head of metals and mining research at Mercuria, stated that the U.S. is becoming the marginal price setter in the current copper market The company Bintas predicted in March this year that copper prices could reach USD 12,000 to USD 13,000 per ton, driven by U.S. import demand.

Bintas stated that if copper prices surge to USD 12,000 or USD 15,000, there will be a lag in the prices on the Shanghai Futures Exchange. He expects that by the first quarter of 2026, the volume of copper arriving in the U.S. could exceed 500,000 tons. He particularly emphasized, "When the Chinese market reopens after the Spring Festival holiday, there may be a severe shortage of copper cathode supply."

Goldman Sachs commodity expert James McGeoch pointed out that a year ago, almost no one foresaw that the U.S. would dominate the copper market landscape. Whether by chance or strategic design, the U.S. now holds key leverage. He emphasized that commodities are physical assets, and trading logic exists not only in Excel models but always involves the complex game of real supply and demand.

Long-term Structural Demand Supports Prices

Investors are flocking to the copper market, not only for the lucrative U.S. arbitrage trades but also betting on the "next wave of AI computing power" and the long-term structural demand driven by global grid upgrades.

Jeff Currie, who led commodity research at Goldman Sachs for nearly 30 years and is now the Chief Strategist of the Energy Pathways team at Carlyle Group, stated earlier this year that copper is the "most compelling trade" he has seen in his 30-year trading career.

The current supply-demand imbalance is expected to persist over the next few quarters, especially against the backdrop of continued supply constraints from major global copper mines and strong demand for U.S. infrastructure construction, which may further exacerbate the tightness in the copper market.

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