Why Copper Is Set to Soar: Grasberg Shutdown, Electrification, and AI Boom

Copper (XCU) is entering a pivotal phase in its market cycle. Prices have surged due to supply disruptions, while demand from AI data centres, electrification, and grid upgrades is increasing. Therefore, copper shows strong bullish potential in the long term despite short-term volatility from economic uncertainties and trade wars. This article examines the fundamental drivers and technical patterns to understand the next move in copper prices.

Fundamental Outlook for Copper Prices

Short-Term Tightness: Grasberg Disruption and Global Supply Risks

Copper prices recently surged to 15-month highs after a deadly mudslide halted operations at the Grasberg mine in Indonesia. The mine is operated by Freeport-McMoRan, the world’s second-largest copper producer. The company declared force majeure and reduced its sales forecasts for 2025 and 2026.

According to some reports, 591,000 tons of copper will be lost between September 2025 and the end of 2026. This accounts for 2.6% of the global 2024 mine production. As a result, Benchmark Minerals expects a 400,000-ton deficit in 2025.

The Grasberg suspension compounds other recent setbacks, including supply issues in Chile and the DRC. This has triggered the largest supply shortfall since 2004. Therefore, Bank of America has raised its copper price forecasts for 2026 and 2027 by up to 12.5%, citing ongoing disruptions and rising demand.

In the short term, copper remains well-supported by tight supply, force majeure events, and mine delays across key producing countries.

Long-Term Growth: AI, Electrification, and the Copper Supercycle

Despite the positive trend in copper prices driven by mine delays, the short-term outlook remains pressured by trade war concerns and weak U.S. consumption. These factors have increased price volatility and kept copper trading within the $4 to $6 range.

Despite short-term price volatility, copper’s long-term outlook remains exceptionally strong. AI data centres, energy storage systems, and transmission infrastructure will drive demand. According to research, the data centre market will grow to $1,008.65 billion by 2034, up from $347.64 billion in 2024.

Data centres could consume up to 10% of North America’s electricity within five years, requiring tens of thousands of tons of copper for wiring and cooling. The surge in battery energy storage systems (BESS) further adds to demand, directly competing with electric vehicles for copper-intensive batteries.

Moreover, miners such as Hudbay Minerals Inc. (HBM), Capstone Copper, and Lundin Mining are expanding aggressively, but permitting delays and infrastructure setbacks may limit how quickly new supply can enter the market. On average, it takes 29 years to permit and build a new mine in the U.S., making a near-term supply response difficult.

Furthermore, copper’s unmatched electrical and thermal conductivity makes it essential to the green energy transition and the digital economy. Transmission lines, transformers, electric vehicles, renewable technologies, and AI infrastructure all depend heavily on copper. As demand accelerates and supply struggles to keep pace, the metal is well-positioned for a multi-year structural bull market.

How Gold, Silver, and Copper Rally Together in Times of Stress

The chart below shows that gold (XAUUSD), silver (XAGUSD), and copper move in the same direction during periods of macroeconomic stress. In 2008–2009, all three metals bottomed after the global financial crisis. As central banks cut interest rates and injected liquidity, prices surged. Silver and copper increased more aggressively, but gold maintained a steadier trend, due to its role as a safe-haven asset.

Moreover, the pandemic crash in 2020 led to synchronised bottoms across all three metals. Prices rebounded sharply as governments deployed massive stimulus. Silver and copper gained on industrial recovery hopes, while gold benefited from inflation fears. On the other hand, a smaller dip in 2022 marked another synchronised low, after which prices resumed their rally.

It is observed that gold is leading the rally, followed by silver and copper. However, silver is now approaching its historical record level at $50. A break above this key level may trigger a strong surge in silver, which could drive further gains in copper.

This view is supported by the copper-to-silver ratio, which has remained mostly flat since 2000, as shown in the chart below. The ratio is now approaching its historical lower range, indicating that copper appears undervalued relative to silver.

As silver nears a breakout above $50, copper may start recovering from its base and begin a strong upward move. Therefore, copper is likely to catch up with silver’s rally in the coming months.

Long-Term Technical Trends: Copper’s Path to Record Highs

The long-term outlook for copper prices remains strongly bullish, as the metal has been trending higher over the past several decades. This bullish momentum is clearly observed on the quarterly chart below, which reveals three distinct growth phases in copper’s price history.

Phase 1: The Early 21st Century Breakout (2002–2006)

The first major rally began after copper bottomed in 2002, surging to a record high of $4.13 in 2006. This price surge was driven due to strong industrial demand and limited supply growth.

China’s rapid urbanisation and infrastructure boom created massive new consumption. Moreover, global inventories dropped as miners struggled to expand capacity after years of underinvestment.

The weak U.S. dollar and rising commodity index funds added speculative buying. Furthermore, the supply disruptions in key regions tightened the market further. These combined forces drove copper to new record highs by 2006.

Phase 2: Post-Crisis Stimulus Rally (2008–2011)

The second strong rally emerged from the 2008 financial crisis low at $1.28, eventually pushing prices to a new high of $4.593 in 2011. This time, the price surge was driven by global stimulus, which fuelled a rapid recovery after the crisis.

In particular, China launched massive infrastructure spending, which drove record demand for copper. Meanwhile, inventories dropped as new mine supply lagged behind consumption. At the same time, investors poured into commodities as a hedge against inflation and a weak U.S. dollar.

Additionally, supply disruptions in major producing countries tightened the market further. These factors combined to push copper to new record highs in 2011.

Phase 3: The Current Ascending Channel (2016–2025)

Following that peak, copper entered a prolonged correction phase, eventually forming new bottoms in 2016 and 2020. After this bottom, a third bullish phase has developed, with copper prices increasing within a long-term ascending channel that began around $1.98 and culminated in a new record high in 2025.

Within this broader channel, two ascending channels have formed over the past three years. The first encountered resistance near $5.80, while the second, smaller channel, formed from the 2020 bottom, which shows strong resistance around the $6.30 area.

However, tariff uncertainties in 2025 have introduced significant price volatility, leading to a multi-year consolidation between $4.00 and $6.00. Despite this, the growing uncertainty is likely to have a net positive impact over the long term.

Surging global demand for copper, driven by technological advancements, green energy transitions, and infrastructure upgrades, will likely push prices to break out strongly over the next few years.

Copper Price Patterns: Breakouts, Support, and Buy Zones

The monthly chart for copper also reveals a strong bottoming pattern, with key lows formed in 2016 and 2020, and a neckline around the $3.20 level. The breakout above $3.20 triggered a strong bullish trend, with prices continuing to trend higher within an ascending channel, recently marking new record highs.

This price action suggests that investors may consider entering on pullbacks, as the long-term uptrend remains intact. Strong support for long-term investors lies in the $3.00 to $4.00 region, offering a favourable accumulation zone during market corrections.

To further understand the bullish price action in copper, the short-term chart shows an ascending channel pattern, where recent volatility following the Trump crisis has established strong support near the $4.00 level. As a result, any correction toward this region holds the potential to trigger a strong rebound toward the $6.00 area.

Despite this consolidation phase, uncertainty remains due to ongoing concerns around the U.S. economic crisis. Therefore, investors may consider buying copper on any meaningful correction near key support levels.

Market Risks

Copper faces several short-term risks despite strong long-term fundamentals. Trade tensions and tariff hikes continue to pressure global industrial activity. The United States has raised average tariffs to levels not seen since 1934. This move reduces household purchasing power and weakens copper demand.

U.S. consumption is already shrinking, with some estimates showing a 6% decline this year. These headwinds can delay the breakout from the current $4 to $6 price range.

On the other hand, economic uncertainty remains another key risk. If the U.S. or China experiences deeper slowdowns, copper demand may fall short. Moreover, the volatility in the US dollar index due to the high debt crisis increases the volatility in copper prices.

Furthermore, policy shifts and permitting delays pose structural risks to supply growth. If miners expand operations, projects face long timelines and political resistance.

Bottom Line

Copper continues to show strong long-term growth potential. This growth is driven by rising demand from AI, electrification, and grid upgrades. Moreover, data centres and energy storage systems are adding new layers of consumption. At the same time, mine delays and global supply disruptions have tightened the market. These factors have pushed prices to multi-year highs and raised the floor for future rallies.

From a technical perspective, copper is trading within a bullish ascending channel. The emergence of strong volatility in 2025, driven by the tariff crisis and economic uncertainty, has kept prices range-bound between $4 and $6. Despite this consolidation, the overall trend remains bullish. Any correction towards the $3 to $4 levels is considered a buying opportunity for investors.