LME copper prices hit a historic high! Tariff arbitrage and favorable supply-demand dynamics resonate: As AI demand becomes the "new engine," Chile's export volume falls to a one-year low.

Driven by expectations that U.S. President Donald Trump will expand tariffs on imports of refined metals, copper prices on the London Metal Exchange (LME) have risen for several consecutive weeks, eventually reaching an all-time high. The three-month benchmark futures price on the LME once increased by 0.8% to $14,533 per ton, breaking the previous record set in January, although the gains later subsided. So far this year, copper prices have risen by 17%, and over the past 12 months, they have surged by 47%, primarily due to a long-term supply-demand imbalance. Aging large copper mines worldwide are struggling to meet the demand from data centers, renewable energy, and power gridsthis context has long been emphasized by copper bulls. However, short-term factors have become apparentparticularly, hundreds of thousands of tons of copper have been shipped to the U.S. this year, as traders seek to profit from higher copper prices in the U.S. Although the U.S. Department of Commerce was originally set to submit a report to the White House two months ago, suggesting the necessity of tariffs, the market is still digesting the potential for tariffs on raw copper imports. Tariffs drive copper prices higher Even though global inventories remain high, the reduction of metal stocks in the extensive global network of LME has resulted in a concentration of these stocks in the U.S. This has led to short-term supply tightness, putting pressure on short positions and pushing prices to new historical highs even amid weak demand. Cristin Cifuentes, a senior analyst at the Chilean copper think tank Cesco, stated, "This is more about metal transfer due to tariffs rather than excess final demand. It is a local shortage, not a global demand surplus." Despite a sluggish trading environment, copper prices in London rose on Monday, influenced by weakened risk appetite in financial markets caused by the U.S. exchanges being closed for Labor Day. Despite facing growing macroeconomic and political headwinds related to GEO Group Inc., such as the war in Iran and skyrocketing borrowing costs in the U.S., which are putting immense pressure on capital-intensive manufacturing companies globally, copper prices continue to rise. High prices themselves may pose a threat to copper demand as buyers could seek alternatives, but so far, these demand-side pressures have not significantly impacted the rising copper prices. U.S. copper imports hit a record high, primarily due to the continued premium of copper futures on the New York Mercantile Exchange (Comex). Since President Trump first formally proposed tariffs on copper last February, this has created significant arbitrage opportunities for traders. Tariff-related trade has severely impacted global inventories, leading to a significant decline in LME copper stocks last month, with stocks supporting copper contract trading dropping to extremely low levels, exacerbating inventory tightness. Although new deliveries have alleviated some pressure, spot prices remain much higher than the LME three-month futures prices, a phenomenon known as "spot premium," indicating that demand exceeds supply. AI and energy transition: Copper's "structural demand" is reshaping long-term logic The long-term logic for rising copper prices has not changed. The development of artificial intelligence and the rapid construction of data centers are currently important drivers of copper demand growth. The demand for copper in AI extends beyond just the wiring and cabling within data centersdata centers consume a significant amount of electricity, which means the market needs additional power generation facilities, transmission lines, substations, transformers, and more extensive grid upgrades. Industry estimates suggest that a 1 gigawatt computing power data center uses 2.5 times more copper than traditional data centers, with nearly 400,000 tons of additional copper demand expected globally for computing clusters by 2026. Other agencies project that the related copper demand increase from global computing expansion in 2026 is expected to be around 475,000 tons. The development of electric vehicles and renewable energy is further increasing the demand for copperCECEP Solar Energy power generation facilities, wind farms, and battery storage projects also require a substantial amount of copper. Crucially, almost every aspect of the electrification process depends on copper. Major global mines are generally facing declining ore grades, aging equipment, and rising operational costs, while new projects are constrained by lengthy exploration, approval, and construction cycles. Mining giants are the biggest winners The rise in copper prices undoubtedly benefits some of the world's largest mining companies, which have long sought to increase their holdings in this metal poised for a long-term demand boom. Rio Tinto plc Sponsored ADR (RIO.US), BHP Group Ltd Sponsored American Depositary Receipt Repr 2 Shs (BHP.US), Glencore, and Zijin Mining Group all reported significant profit growth in their latest financial statements, primarily due to strong performance in their copper businesses. Rio Tinto plc Sponsored ADR's copper business saw a base EBITDA increase of 84% year-on-year in the first half of 2026, reaching $5.7 billion, with free cash flow surging by 325%. In contrast, the group's largest profit source, the iron ore business, experienced a 1% year-on-year decline in base EBITDA. The three base non-ferrous metalscopper, aluminum, and lithiumhave already contributed over half of Rio Tinto plc Sponsored ADR's EBITDA. Chile, the world's largest copper producer, saw its copper exports drop to the lowest level in a year Nonetheless, this year, many large mining companies continue to face operational challenges. Data released on Monday revealed that despite soaring copper prices, Chile's copper export earnings in August fell to their lowest level in over a year due to severe winter storms and mining accidents in the world's largest copper-producing country. Unless the copper industry witnesses a recovery in the second half of the year, global copper mine supply will experience its first annual decline since 2017. According to data published on Monday, Chile's copper export revenue last month was $4.62 billion, a 14% decrease from July and a 3.2% drop from the same period last year. This marks the lowest monthly data since July 2025. Although copper prices have strengthened, with average prices in August up over 40% year-on-year, export revenues still declined. This year, Chile's mining sector has encountered operational setbacks, with heavy rain, snow, and strong winds in July and August leading to mine shutdowns, while adverse sea conditions occasionally restricted port activities. The production difficulties faced by a country accounting for a quarter of global copper output are supporting copper prices and exacerbating the already tight global supply situation due to disruptions in other regions. Extreme weather is amplifying supply risks. Antofagasta and Lundin Mining have both lowered their production guidance for 2026, to 625,000 to 655,000 tons and 300,000 to 325,000 tons, respectively. Data from the International Copper Study Group (ICSG) indicates that global copper mine production declined by 1.1% year-on-year in the first half of 2026, with industry giants Codelco and Freeport-McMoRan both experiencing double-digit declines in production. Morgan Stanley has revised its earlier production growth expectations downward to essentially flat or even slight declinesmeaning that global copper mine annual production may face its first annual decline since 2017. Michael Cuoco, head of metals at StoneX Financial Inc., stated that strong demand coupled with supply challenges "should lead to a tighter future market balance of supply and demand, thereby supporting price increases."