The collective withdrawal of downstream bosses may be the final warning signal for copper prices.

Next, consider geopolitics. Tensions between the U.S. and Iran have escalated sharply in recent weeks: the U.S. military has launched repeated strikes against Iranian targets, and Iran has retaliated by attacking the Al Udeid Air Base in Qatar. The safety of maritime passage through the Strait of Hormuz has become a global focal point. Although copper itself is not shipped through the Strait of Hormuz, any disruption to oil transportation would drive up energy costs—and thereby raise production costs across the entire industrial sector. Even more critically, if the Strait of Hormuz were actually blocked, large-scale electrolytic aluminum plants and sulfur supplies across the Middle East would face severe disruptions. Sulfur is a key raw material for producing sulfuric acid—the very acid indispensable to copper smelting, as noted earlier. Should sulfur prices surge due to Middle Eastern instability, copper smelting costs would rise further—posing yet another latent risk to supply-side stability. Trump has even issued a stark warning, stating he will soon launch an 'extremely intense' strike against Iran’s underground nuclear facilities at Fordow. Will this powder keg in the Middle East ignite entirely? The entire market is holding its breath. While geopolitical risks trigger short-term risk-aversion—prompting capital outflows from risk assets—they add significant uncertainty to copper supply. For copper—a strategic commodity already operating under tight supply conditions—geopolitical conflict primarily strengthens the price floor by amplifying supply-side vulnerability. Divergence among institutions: Even the ‘gurus’ are clashing Faced with such complexity, institutional views have diverged markedly—a trend clearly evident in the flurry of recently published research reports. The bullish camp—represented by Changjiang Securities, Huatai Futures, and Datong Securities—centers its argument on rigid supply constraints. Changjiang Securities’ view is particularly representative: weak supply underpins the copper price floor, while AI-driven demand lifts the ceiling; overall, copper prices are prone to rise and resistant to decline. They point out that copper-related stocks and copper prices have diverged significantly: equity valuations already reflect pessimistic expectations of falling copper prices, yet the underlying fundamentals supporting copper prices are far stronger than the market imagines. Once macroeconomic headwinds ease, valuation recovery could exceed expectations. Oriental Securities goes further, highlighting a pivotal shift: the investment logic for copper stocks is transitioning from ‘expectation’ to ‘reality’. In the past, markets traded on the expectation—‘copper shortages may occur in the future’; now, actual shortages are being concretely verified through rising spot premiums, falling inventories, and strengthening near-month futures contracts. As logic shifts from abstract anticipation to tangible evidence, the pricing foundation becomes more robust. The cautious camp—led by Everbright Futures and Shenwan Hongyuan—offers contrasting perspectives. Everbright Futures issues a direct caution: although copper prices have risen for three consecutive sessions to surpass RMB 106,000 per ton, the rebound’s upside potential warrants prudence, given worsening U.S.–Iran tensions and lingering overseas financial risks. Shenwan Hongyuan focuses instead on the contradiction between sluggish demand and surging smelting output, arguing that copper prices face near-term downward pressure. At its core, this divergence reflects fundamentally different views on whether high prices can persist. The bullish side contends that as long as inventories do not rise and spot premiums remain elevated, prices can hold firm—even amid weak downstream demand. The cautious side counters that without demand support, any price sustained solely by supply-side narratives will inevitably correct. This very disagreement is itself a reflection of the market’s heightened uncertainty.

The current state and structural shifts in the global copper market in 2026.

Originally, processing fees constituted the core revenue source for global copper refining capacity. Yet today, the copper concentrate market suffers from severe supply shortages, granting mining companies absolute pricing power—ultimately forcing smelters to accept zero processing fees. The China Copper Concentrate Joint Negotiation Group—a coalition of sixteen major Chinese smelters—has suspended publication of its benchmark processing fee guidance for four consecutive quarters! The China Nonferrous Metals Industry Association has explicitly opposed such ‘zero-fee’ or even ‘negative-fee’ arrangements. Japan, Spain, and South Korea have likewise voiced concerns: Mitsubishi Materials, for instance, has announced plans to cut primary smelting capacity by 30–40% over the next decade, shifting focus toward recycled copper recovery. Clearly, the industry’s midstream segment has been pushed to the brink. The fragility of smelters’ business models Chinese copper smelters have not yet halted operations—primarily because they rely on revenues from three by-products. This dependency represents the copper market’s greatest latent risk. First, sulfuric acid. Copper smelting generates sulfuric acid as a by-product: roughly three tons of sulfuric acid per ton of copper produced. Currently priced above RMB 1,000 per ton, sulfuric acid contributes 40% of smelters’ revenue—mainly used in fertilizer production and lithium processing. Second, precious metal recovery. Gold and silver contained in copper concentrates are extracted during smelting. With gold prices hitting record highs, this stream accounts for 35% of smelters’ revenue. Third, cathode copper premiums. When selling physical cathode copper, smelters charge a premium over exchange benchmark prices. During periods of tight supply, this premium can reach USD 300 per ton—contributing 25% of revenue. Under normal circumstances, these three revenue streams exhibit low correlation, each driven by distinct factors: Sulfuric acid prices hinge on industrial and fertilizer demand; Precious metal recovery depends on gold and silver prices; Cathode copper premiums reflect physical copper tightness. Typically, all three do not move in tandem—neither rising nor falling simultaneously. Precisely because of this low correlation, the trio forms a diversified revenue portfolio that mitigates risk: even if one stream falters, the other two likely sustain smelter operations.

Copper Slides as China Industrial Data Weighs on Demand Outlook

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