LME copper prices reach an all-time high! Tariff arbitrage and favorable supply-demand dynamics resonate: as AI demand becomes the "new engine," Chilean export volumes have dropped to a one-year low.

Driven by expectations that U.S. President Donald Trump will expand tariffs on imported refined metals, copper prices at the London Metal Exchange (LME) have risen for several consecutive weeks, ultimately setting a historic high. The three-month benchmark futures price on the LME once climbed 0.8% to $14,533 per ton, breaking the previous record set in January, before retreating somewhat. Since the beginning of this year, copper prices have increased by 17%, and in the past 12 months, they have surged by 47%, primarily due to a long-term imbalance between supply and demand. Aging large copper mines worldwide are struggling to meet the copper demand from data centers, renewable energy, and the power gridthis backdrop has long been emphasized by copper bulls. However, short-term factors have now come to the forefrontparticularly the shipment of hundreds of thousands of tons of copper to the U.S. this year, as traders attempt to profit from the higher copper prices in America. Although the U.S. Department of Commerce was initially scheduled to submit a report to the White House two months ago regarding the necessity for tariffs, the market continues to digest the possibility of tariffs on raw copper imports. Tariffs are driving copper prices higher. Despite the overall global inventory still being relatively high, the reduction of metal stockpiles within LME's vast global network has led to these stocks being highly concentrated in the U.S. This has resulted in short-term supply tightness, putting pressure on short positions and driving prices to historic highs even amid weak demand. Cristin Cifuentes, a senior analyst at the Chilean copper industry think tank Cesco, commented, This is more about the metal being transferred due to tariffs rather than an oversupply of final demand. This is a local shortage, not a global oversupply. Despite the thin trading environment, copper prices in London still rose on Monday, as the U.S. exchanges were closed due to the Labor Day holiday, which weakened risk appetite in the financial markets. Even in the face of growing macroeconomic and political headwinds for GEO Group Inc., such as the war in Iran and rising borrowing costs in the U.S., which will place tremendous pressure on global capital-intensive manufacturing businesses, copper prices continue to rise. The high prices themselves may also pose a threat to copper demand, as buyers may seek alternatives, but so far, these demand-side pressures have not significantly impacted the rise in copper prices. The U.S. copper imports have reached an all-time high, primarily due to the sustained premium of Comex copper futures prices. Since President Trumps formal proposal to impose tariffs on copper last February, this has created significant arbitrage opportunities for traders. Tariff-related trades have severely impacted global inventories, as LME copper stocks saw a significant decline last month, pushing the inventories supporting copper contract trading to extremely low levels, exacerbating the tight inventory situation. Although new deliveries have alleviated some pressure, spot prices remain well above the LME three-month futures prices, a phenomenon known as "spot premium," indicating that demand exceeds supply. AI and energy transition: The "structural demand" for copper is reshaping long-term logic. The long-term logic for rising copper prices remains unchanged. The development of artificial intelligence and the rapid construction of data centers are crucial drivers of current copper demand growth. The demand for copper tied to AI extends beyond just the wires and cables within data centersdata centers consume vast amounts of electricity, meaning that the market also needs additional power generation facilities, transmission lines, substations, transformers, and broader grid upgrades. Industry estimates indicate that 1 gigawatt of computing power data centers use 2.5 times as much copper as traditional data centers, with nearly 400,000 tons of additional copper demand expected just from global computing cluster construction in 2026. Other institutions estimate that the related increase in copper demand resulting from the global computing expansion in 2026 is expected to be around 475,000 tons. The development of electric vehicles and renewable energy is also further increasing copper demandinstitutions like CECEP Solar Energy power generation facilities, wind farms, and battery storage projects also require significant amounts of copper. The key point is that every aspect of the electrification process relies on copper. Major global mines are generally facing declines in ore grades, aging equipment, and rising operating costs, while new projects are constrained by long exploration, approval, and construction cycles. Mining giants emerge as the biggest winners. The rise in copper prices is undoubtedly beneficial for several of the world's largest mining companies, which have long sought to increase their holdings of this metal that is approaching a period of long-term demand prosperity. 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 increases in their latest financial statements, primarily due to strong performance in their copper businesses. Rio Tinto plc Sponsored ADR reported an 84% year-on-year increase in its copper business's underlying EBITDA for the first half of 2026, reaching $5.7 billion, with free cash flow rising by 325%. In contrast, the groups largest profit source, its iron ore business's underlying EBITDA, fell by 1% year-on-year. The three non-ferrous metals businesses of copper, aluminum, and lithium have contributed to more than half of Rio Tinto plc Sponsored ADRs EBITDA. Copper exports from Chile, the largest copper-producing country globally, have still fallen to a year-long low. Despite this, many large mining companies are facing operational challenges this year. Data released on Monday showed that despite soaring copper prices, Chile's copper export revenues fell to their lowest level in over a year in August due to severe winter storms and mining accidents affecting the largest copper-producing country. Unless there is a recovery in the copper industry in the second half of the year, global copper mine supply is poised for its first annual decline since 2017. According to data released on Monday, Chile's copper export value last month was $4.62 billion, down 14% from July and down 3.2% compared to the same period last year. This is the lowest monthly figure since July 2025. Although copper prices strengthened, with the average price in August up over 40% compared to the previous year, export revenues still declined. This year, Chiles mining industry has faced operational setbacks, with rains, snowstorms, and strong winds in July and August leading to mine shutdowns, while poor sea conditions have often restricted port activities. The production difficulties in a country accounting for a quarter of global copper production are supporting copper prices, intensifying an already tight global supply situation aggravated by disruptions elsewhere. Extreme weather is further amplifying supply risks. Antofagasta and Lundin Mining have each lowered their production guidance for 2026 to 625,000 to 655,000 tons and 300,000 to 325,000 tons, respectively. According to data from the International Copper Study Group (ICSG), global copper mine output in the first half of 2026 is expected to decline by 1.1% year-on-year, with industry giants Codelco and Freeport-McMoRan experiencing double-digit declines in output. Morgan Stanley has revised its earlier production growth forecasts down to essentially flat or even slight declinesmeaning global copper mine annual output could see its first annual decline since 2017. Michael Cuoco, head of metals at StoneX Financial Inc., noted that strong demand combined with supply challenges "should lead to a tighter future market balance between supply and demand, thereby supporting price increases."