SunSirs: A Comprehensive Explanation of the Logic Behind Copper Prices Breaking the 100,000 RMB/Ton Mark

Price trend:

As shown in the image above, on December 29th, the spot price of copper officially broke through the 100,000 RMB/ton mark, reaching 101,053.33 RMB/ton, a single-day increase of 3.24%. This is nearly three times the lowest price in the past 15 years (34,000 RMB/ton), and a 36.87% increase compared to the price at the beginning of the year (73,830 RMB/ton). Citibank analysts even boldly predicted that by 2026, the price of copper is highly likely to surpass 100,000 RMB/ton, setting a new historical high! With only three days left until the new year, the copper price had already broken through the 100,000 RMB/ton mark, demonstrating its unstoppable momentum!

In the futures market, on Friday, January 26th, the Shanghai Futures Exchange's copper contract broke the 100,000 RMB/ton mark for the first time in history during the night trading session, closing up over 3.3% and firmly above the 100,000 RMB/ton level. On January 29th, the Shanghai copper contract maintained its position above 100,000 RMB/ton during the day trading session. The rise in New York copper futures was even more dramatic on Friday, with the COMEX March copper futures contract trading above $5.8510 per pound by the end of the day, up nearly 5% from the previous trading day's close. During US trading hours, it even reached $5.8880, surpassing the intraday high set during the unprecedented short squeeze in July of this year, representing a 5.6% increase for the day.

The recent surge in copper prices is the result of a combination of factors: tight supply, rising demand, policy expectations, and financial speculation.

The US was frantically stockpiling copper

The United States imposes a high tariff of 50% on semi-finished copper pipes and wires, but exempts copper ore raw materials from tariffs. This allows them to protect their domestic copper processing companies while simultaneously importing large quantities of raw materials without hindrance. Furthermore, they require that 25% of high-quality copper scrap produced domestically must be sold within the country, leading to a concentration of global copper resources in the United States. At the COMEX exchange in the US, copper inventories have piled up to a record-breaking 482,900 short tons, more than triple the amount at the beginning of the year. More than 60% of the copper inventory across the world's three major exchanges is now stored in the United States.

Global supply chains have been disrupted. Copper originally destined for Asia is now being diverted to the United States. Copper prices in the New York market are significantly higher than in London, yielding a net profit of several hundred dollars per ton even after accounting for transportation costs. As a result, copper supply in the Asian market is tight, and spot prices are experiencing a continuous premium increase.

Black swan events were occurring frequently in the global copper mining industry

In 2025, the global copper mining industry will experience frequent "black swan" events, including a mine collapse in Chile, production halts at Indonesian mining companies, and dim prospects for the resumption of operations at a Panamanian copper mine. These events will result in a combined production reduction exceeding 3% of global output, leading to a year-on-year decrease of 220,000 tons in total production. In 2026, new global copper mining capacity will be less than 500,000 tons, with a growth rate of only 1.4%, far behind the 2.9% demand growth rate, resulting in a supply-demand gap of 180,000 tons. This gap will surge to 380,000 tons and 650,000 tons in 2027 and 2028, respectively, indicating a widening supply deficit.

New essential needs were emerging rapidly

New demand was exploding across the board. New energy vehicles use three to four times more copper than traditional fuel vehicles, with a single electric bus requiring several hundred kilograms of copper. AI computing power has become the biggest growth driver, and copper is the "bloodline" of computing centers. A single high-end AI server uses 15-20 kg of copper, three times that of a traditional server. Liquid cooling systems and high-speed copper cables are indispensable, and training a large AI model consumes as much copper as 37 electric vehicles. The acceleration of global computing infrastructure in 2026 will drive a 45% surge in copper demand. Even more surprising is the humanoid robot sector; each robot uses 12 kg of copper, with joint motors and sensors relying entirely on copper. Once mass production begins in 2026, this will create another wave of significant demand.

The latest IMF research indicates that global oil demand will continue to decline over the next two decades, while copper demand will surge by 66%—copper is becoming the "industrial lifeblood" of the new energy era. The global energy system is undergoing a complete shift from "combustion-driven" to "electricity-driven," and the foundation of all electrification is copper. Based on this fundamental shift, the current copper market has entered an era of "scarcity pricing."

The fall in the US dollar was fueling a surge in copper prices

The Bloomberg Dollar Spot Index fell by nearly 0.8% in the previous week, marking its largest weekly decline since the week of June 27th, making dollar-denominated raw materials cheaper for most buyers. The latest inflation data from the US showed a cooling trend, and the market widely anticipates the Federal Reserve will begin cutting interest rates next year. A Fed interest rate cut typically weakens the dollar. For countries using currencies other than the dollar, such as China with the RMB, a weaker dollar means that goods become cheaper. The cost of purchasing dollar-denominated copper decreases, which stimulates more buyers to enter the market. The influx of a large amount of speculative capital into the copper market has also fueled this epic rally.

The impact of rising copper prices:

Chinese copper smelters, in negotiations with Chilean mining giant Antofagasta for next year's cooperation, have reportedly agreed to a "zero" processing fee for copper concentrate! To illustrate, imagine you own a flour mill; farmers give you their wheat, and you mill it into flour for free, earning no processing fee whatsoever. You can only hope to make a little money from the by-products like wheat bran. The fact that smelters have been reduced to this point shows just how tight the supply of upstream copper ore is.

Power grid companies are having a tough time. State Grid Corporation of China incurred over 10 billion yuan in extra costs last year due to rising copper prices, forcing the postponement of some rural power grid upgrades and ultra-high voltage projects. The home appliance industry is also suffering; copper accounts for 15% to 20% of the cost of air conditioners, and the increase in copper prices adds about 200 yuan to the cost of each unit, ultimately passing these costs on to consumers. It's like you're grinding wheat into flour for free, earning no processing fee, and only hoping to make a little money from the by-products like wheat bran. The fact that smelters have been reduced to this state shows how tight the supply of upstream copper ore is.

The cable industry consumes an astonishing amount of copper, with copper materials accounting for 60% to 80% of production costs. With such a surge in copper prices, manufacturers simply can't cope. One cable factory owner calculated that for every 1,000 yuan increase in copper price, their cost per kilometer of cable increases by several thousand yuan. Now that copper prices have risen by more than 35% since the beginning of the year, how can they absorb these costs? They either have to bear the losses themselves or raise prices and pass the pressure on to their customers.

Overall, excessively high copper prices are not a good thing. The trend of substituting aluminum for copper is accelerating, and some industries have already begun to research technological solutions to reduce copper consumption. In the long run, there are no winners in the competition for resources.

Market Outlook

The surge in copper prices is the result of a combination of global supply shortages, booming demand, and the prevailing macroeconomic and financial environment. This indicates that the metal market is undergoing profound changes against the backdrop of global resource competition and energy transition. For China, as the world's largest copper consumer and manufacturing powerhouse, ensuring the security of its supply chain and gaining greater influence in this changing landscape will be a crucial challenge. In the short term, copper prices have reached a historical high, and some investors are likely to take profits, coupled with year-end capital repatriation, which will likely lead to a period of high-level volatility. However, in the long term, the 100,000 RMB/ton target is not the end point, but a new beginning; the core logic driving copper prices remains unchanged.

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