Copper Hits Record Highs Amid Supply Squeeze, Dollar Weakness

Copper prices hit record highs on Dec. 3, driven by a weaker dollar, supply concerns, and reduced availability in London Metal Exchange (LME) warehouses. Three-month copper on the LME rose 1.7% to US$11,333/mt, briefly reaching an all-time peak of US$11,434.50. 

“Copper looks very bullish after hitting new highs, and algorithmic trading models are signaling buy opportunities. Prices could potentially climb to US$12,000/t,” said Dan Smith, Managing Director, Commodity Market Analytics.

Positive sentiment was reinforced by stronger-than-expected business activity in the eurozone, which grew at its fastest pace in over two and a half years in November. LME data showed net cancellations of 50,725t from Asian warehouses on Dec. 2, leaving stocks at 105,275t, the lowest since July. Comex premiums over the LME benchmark are attracting inflows, now at record levels, while the LME’s spot premium over the three-month contract hit US$69/t, signaling a short-term supply squeeze. Expectations of an upcoming US Federal Reserve rate cut, combined with a softer dollar, further supported gains, making dollar-denominated metals more attractive and growth-sensitive metals more appealing. 

Among other base metals on the LME, aluminum rose 0.5% to US$2,880/t, zinc gained 0.2% to US$3,066, lead increased 0.5% to US$2,005, and tin advanced 1% to US$39,505, while nickel improved 0.7% to US$14,895.

Structural Imbalances, Regional Demand Shifts Drive Market Tensions

Short-term market pressures reflect deeper structural dynamics in the copper market. Bloomberg analysts note that refiners are resisting the unusual idea of negative premiums, where they would essentially pay miners to process copper. China’s main metallurgical association has criticized these “unsustainable” sub-zero fees during annual contract talks.

Miners are in a strong position after years of unchecked growth in refining capacity, a situation worsened this year by unexpected supply cuts. Spot prices, which often guide annual contracts, have stayed negative for much of the year, creating tense negotiations and highlighting the risk of disrupting the global benchmark system.

“If this conflict can be avoided, the benchmark index can be preserved, especially as smelters begin to slow the growth of excess capacity and more supply comes from mines,” said Ti Kurth, Operations Director, Aurubis.

The United States is expected to absorb significant flows of refined copper, where prices are elevated due to persistent expectations of import tariffs. Nicholas Snowdon, Head of Metals Research, Mercuria Energy Group, projected that the United States could hold up to 90% of global copper inventories by 1Q26. This concentration has global ripple effects: as more cathode copper moves to the United States., other markets tighten. Suppliers such as Chile’s Codelco have offered record premiums of US$350/t to some Chinese buyers. Snowdon described this situation as an “extreme dislocation,” warning of potential shortages outside the United States  over the next three to six months.

Meanwhile, copper demand in China is moderating. Renewable energy sectors remain robust, but construction and consumer goods are slowing. Tianyu He, Senior Analyst, CRU Group, cautioned that the medium-term risk to Chinese demand is that the property sector decline could become irreversible. Helen Amos, Managing Director, BMO Capital Markets, added that accelerated supply from mining projects in the United States, Canada, and Chile, along with potential copper substitution, should ease market pressures. On an inflation-adjusted basis, copper prices remain within historical ranges, suggesting that any severe supply constraints would already be reflected in current pricing.