Copper prices swing as inflation fears hit industrial metals
Copper wires are wound into bobbins on pallets in the wire plant (winder) at Aurubis AG. After a casting and rolling process, the hot copper wire is wound from the winder into a coil weighing up to five tonnes and approximately twelve kilometers long.
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Industrial metals have been volatile this week as fears of rising inflation put pressure on global bond markets.
Copper futures for August delivery fell 1.3 percent on the London Metal Exchange on Tuesday, then rose 0.5 percent on Wednesday to $13,477 a tonne. Used in products as diverse as electrical cables, machinery and plumbing, the metal is widely seen as a bellwether for the global economy.
How did copper futures for August delivery fare last month?
Aluminum, nickel, tin and zinc similarly oscillated between gains and losses.
The moves come amid wider volatility in trading in global bond and equity markets. Global stocks have been volatile as investors weighed corporate earnings and U.S. Treasury yields soaring to their highest levels in a decade.
Analysts told CNBC that the outlook for many industrial metals is blurring due to issues arising on both the supply and demand sides.
Zinc
In a note last week, strategists at Macquarie said potential risks to zinc were weighed against demand pressures, given that around 55% of end-use demand is in the construction sector and is therefore vulnerable to any economic downturn.
“On the supply side, higher diesel, acid and explosives costs are putting pressure on margins, but at current metal prices this should not be a problem,” they said.
“Energy prices in Europe pose a significant risk to European zinc smelters, but energy prices have not yet reacted much to the situation in the Middle East.”
Aluminum
Similar uncertainty has emerged in aluminum in Europe and North America, where “structurally tight supply is set against weak final demand,” according to Shashank Sriram, senior metals analyst at Wood Mackenzie.
Aluminum is an important material in electronics, transportation and construction, as well as other industries such as solar panels and packaging. About 9% of global aluminum supply comes from the Gulf, and most firms there have been unable to export the metal outside the region since Iran effectively closed the Strait of Hormuz.
“As the conflict continues, supply risks become more entrenched,” Sriram told CNBC.
“Even in a scenario where the Strait reopens, the supply shock cannot be quickly reversed; beyond transport disruptions and raw material disruptions, the restart of smelters after both controlled closures and uncontrolled damage will be gradual, meaning the recovery will be gradual rather than immediate.”
As such, Wood Mackenzie sees “insufficient momentum on the demand side to sustain a move towards $4,000 per tonne” in the near future.
Copper: ‘Macro and micro tug of war’
Macquarie commodity strategist Alice Fox told CNBC via email that the particularly bullish narrative that had copper on the rise through 2025 is still supporting prices due to mineral supply shortages and strong demand from the energy transition.
He added that the “emotion-driven” nature of prices was caught between demand for the red metal and fear of high interest rates.
Charles Cooper, head of copper research at Wood Mackenzie, told CNBC that metal prices are highly volatile but remain at historically high levels around $13,500 per ton.
“While prices recently peaked at an all-time high near US$14,500/t, they are currently consolidating below those levels,” he said in an email. “Higher absolute prices triggered a wave of demand stimulus in China’s spot market, allowing broader macroeconomic fluctuations to lead to aggressive two-way swings.”
Cooper added that the sharp difference between the US and Chinese bond markets caused serious fluctuations in funds.
“Rising inflation expectations in the US are pushing Treasury yields higher, supporting the strong US dollar and leading to periodic profit taking on long copper positions,” he said.
“Conversely, Chinese government bond yields remain near historic lows, signaling the stagnation of the domestic manufacturing and real estate sector, which is currently struggling to provide the physical demand needed to support the next sustainable upswing.”
Despite these macro pressures, the physical market remains highly sensitive to the risks of ongoing supply-side disruption, according to Wood Mackenzie. The world’s second largest copper mine, Grasberg in Indonesia, has returned to full operation delayed to 2028, after the deadly mudslide in 2025.
Flooding at the Kamoa-Kakula mine in the Democratic Republic of Congo and an accident at the El Teniente mine in Chile also affected supplies last year.
Cooper added that many physical copper supplies are still concentrated in U.S. warehouses following tariff-related stockpiling, limiting availability in the broader market.
“Overall, copper reflects a classic macro and micro tug of war,” he told CNBC.
While structural, relatively price-inelastic demand drivers such as grid expansion and AI data center infrastructure continue to support the long-term narrative, Cooper noted that data center-related consumption is not yet fully proven in physical markets.
“In the face of softer macro conditions and rising inventories, this suggests the market may be pricing in some of the longer-term story early,” he said. “For now, this leaves copper in a floating range between $13,200 and $13,800 per tonne, with further upside requiring both stability in global bond yields and a clearer recovery in Chinese industrial activity.”
