- Copper dropped ~3% from its record-high close, ending an eight-day winning streak driven by mine disruptions and AI-demand optimism; the metal was trading at $13,765/ton on the LME Friday.
- Surging U.S. wholesale and consumer inflation — both at multiyear highs — plus a 1% dollar rally this week are pushing bond yields higher and cooling rate-cut expectations globally.
- In China, the world’s largest copper consumer, near-record prices have begun to deter demand, with fabricators reporting weakening orders this month.
- Zinc also slipped 0.8% after spiking to its highest since 2022 Thursday, following a fire-induced suspension at a major Peruvian smelter.
What Happened?
Copper extended its retreat from a record-high close, falling about 3% from Wednesday’s peak as a combination of macro headwinds overwhelmed the supply-side tailwinds that had driven eight consecutive days of gains. The Bloomberg dollar gauge jumped 1% this week while U.S. wholesale and consumer inflation printed at multiyear highs — the continued effective closure of the Strait of Hormuz is pushing energy prices higher, feeding into broader inflationary pressure. Higher yields and a stronger dollar make dollar-denominated commodities more expensive for foreign buyers and reduce the appeal of non-yielding assets like metals. At the same time, demand signals from China are softening: copper fabricators are reporting weaker orders as prices near record levels curb appetite for the metal.
Why It Matters?
Copper has been one of the year’s most closely watched commodity barometers — its near-record run was fueled by AI infrastructure optimism (copper is essential for data center wiring), mine supply disruptions, and the energy transition. The pullback illustrates the tension between structural demand tailwinds and the cyclical macro headwind of entrenched inflation killing rate-cut expectations. For markets, copper’s retreat is a real-time signal that the “higher for longer” rate environment — now reinforced by Hormuz-driven energy costs bleeding into core inflation — is beginning to bite commodity demand. China’s demand softening at these price levels adds a second layer of caution.
What’s Next?
Copper analysts expect the metal to fluctuate this quarter absent a material tightening in supply-demand balances. The key swing factors are: whether Hormuz reopens and eases the energy-inflation spiral; whether AI data center buildout accelerates copper demand enough to offset Chinese demand weakness; and whether the Fed (now under incoming chair Warsh) signals any flexibility on rate cuts. In the near term, elevated prices and macro uncertainty are likely to keep Chinese fabricator buying subdued — capping the upside even as mine disruptions continue to support the floor.
Source: Bloomberg
