Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
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Copper navigates energy transition, supply shocks, and market turmoil
Ole Hansen
Head of Commodity Strategy
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Key points:- Copper prices have managed a strong rebound, led by New York, following the dash-for-cash crash in early April.
- A key piece in the electrification puzzle suggests the world will require 115% more copper to be mined over the next 30 years than has been mined in all of history.
- A strong tariff-related premium in New York over London has accelerated withdrawals from warehouses in Europe and Asia, with one trading house warning China stock levels could dwindle to nothing in a few months.
- Overall, the sector faces long-term supply constraints due to a lack of new discoveries, longer development timelines, declining ore quality, and sharply rising discovery costs.
- While mining companies extracting gold have seen strong year-on-year gains, copper-focused miners have experienced more muted performance.
The combination of increased power demand for cooling and data centres, as well as the transition to cleaner energy sources and the push to mitigate climate change, will reshape commodity markets in the coming years. Governments and corporations around the world are currently investing heavily in renewable energy infrastructure, electric vehicles, and energy-efficient technologies—driving demand for key transition metals such as:
- Copper, essential for electrical grids, EVs, and battery storage
- Aluminium, widely used in lightweight transportation and solar panel frames
- Lithium, cobalt, and nickel, crucial for battery technologies
- Silver and rare earth elements, vital for solar panels, wind turbines, and advanced electronics
- Platinum, used in hydrogen fuel cells, electrolysers for hydrogen production, catalytic converters, and advanced battery technologies
Rising global temperatures are increasing the demand for cooling technologies, such as air conditioning—with the recent heatwave across the Southern Hemisphere a stark reminder. Together with growing power demand from data centres handling AI and cloud computing, and industrial electrification, these developments will further boost power consumption. This will increase demand for copper due to its excellent electrical conductivity, making it ideal for wiring and components crucial to efficient power transmission and distribution—an increasingly important factor as renewable energy sources are integrated into the grid.
However, for now, global financial markets have been unsettled by Trump’s aggressive trade policies, sparking threats of retaliation and a broad selloff on concerns that a global trade war at the current scale and magnitude will drive an economic slowdown—not least in the US, where inflation forecasts have spiked, and consumer and business sentiment has fallen sharply in recent months.
These concerns are reflected in the copper–gold ratio, which has slumped to a multi-year low. Investors have rushed into gold amid concerns over economic growth, inflation, and financial stability—driving up its price. Meanwhile, copper, despite its long-term bullish potential, has struggled in the face of stagflation risks in some regions. These are only partly offset by continued strong demand from the energy transition. The ratio is likely to bounce eventually, but not until solutions are found to the many major challenges the world currently faces, both from a geopolical and economical perspective.
Returning to the present situation in the copper market, fears of US tariffs on copper imports remain a key factor setting the agenda in recent months. Since January, the New York-traded High Grade copper future has risen strongly relative to the global benchmark price set in London, as traders attempt to anticipate the eventual level of tariffs, with the premium currently trading around 13–15%. Put simply, the current premium in New York is not due to strong end-user demand, but rather major stockpile shifts to the US. While this creates a windfall for traders able to source and ship copper to the US, these flows—most of which will remain in the US until consumed—will exacerbate an already tight global market in the second half of 2025. Goldman Sachs in a recent report estimated that 45-60% of global reported copper inventoreis could end up in the US by Q3 2025, and with the US only accounting for 6% of global refined demand, the rest of the world could be left with very low stocks of this important transition metal.
The recent rush to ship copper to the US has triggered a sharp reduction in warehouse stocks monitored by futures exchanges in London and, notably, Shanghai. China’s inventories fell by almost 55,000 tonnes last week—the biggest weekly drop on record. With the LME seeing a 10,000-tonne decline, these were only partly offset by an 8,000-tonne increase at COMEX. The reduction is only partly explained by continued flows towards the US ahead of an expected tariff announcement, with more copper currently at sea expected to reach US warehouses in the coming weeks. In fact, Mercuria, the commodities trading house, recently told the Financial Times that China’s copper stockpiles could dwindle to nothing in just a few months. The market is undergoing “one of the greatest tightening shocks” in its history due to fears of US tariffs. At the same time, traders in China are reporting a surge in domestic demand, driving up the premium for imported copper. This suggests that, despite concerns over economic growth, price support will likely persist in the short term—and especially over the long term—as global electrification continues to drive ever-increasing copper demand.
A report from the International Energy Forum published last May stated that meeting the world’s electrification goals will require 115% more copper to be mined over the next 30 years than has been mined in all of history. Exploration spending from miners reached a decade high in 2024; however, the sector faces long-term supply constraints due to a lack of new discoveries, longer development timelines, declining ore quality, and average discovery costs now four times higher than two decades ago.
While mining companies extracting precious metals—especially gold—have seen strong year-on-year gains (e.g. a 41% increase in the VanEck Gold Miners ETF, which tracks a basket of major mining companies), copper-focused miners have experienced more muted performance, given the aforementioned challenges. However, with demand and prices expected to remain robust despite current global growth worries, the sector probably deserves renewed attention—or at least a place on the radar for potential investment.
Recent commodity articles:
28 April 2025: COT Report: Continued gold selling; USD weakness drives record JPY long
25 April 2025: Commodities weekly Energy slump overshadows strength in gold and agriculture
23 April 2025: Blowout top leaves Gold in consolidation mode
22 April 2025: Commodities return Why allocation matters
16 April 2025: Whats next as gold hits our USD 3300 target
15 April 2025: COT Reports show hedge funds racing to cash post-Liberation Day
11 April 2025: Commodities weekly As chaos reigns whats next for markets
10 April 2025: YouTube Interview: Gold, silver, copper, oil - prices, supply, demand in 2025
8 April 2025: Golds deleveraging pullback fails to shake supportive outlook
8 April 2025: Golds deleveraging pullback fails to shake supportive outlook
7 April 2025: COT on Forex and Commodities - April 7 2025
4 April 2025: Commodities weekly Tariff-led recession pain triggers sharp reversal
3 April 2025: Tariff-related recession fears ignite widespread commodities selloff
2 April 2025: Commodity Outlook: Commodities rally despite global uncertainty
31 Mch 2025: COT Report: Ongoing USD selling amid mixed week for commodities
26 Mch 2025: Commodities show strength in Q1, led by a select few
25 Mch 2025: Crude oil Sanctions threat counters tariff-driven demand worries
24 Mch 2025: COT on Forex and Commodities - 24 March 2025
21 Mch 2025: Commodities weekly: High-flying precious metal sees profit taking
19 Mch 2025: Has the gold express already left the station?
17 Mch 2025: COT Report: Silver and copper stands out in week of energy weakness
14 Mch 2025: Gold surges past USD 3,000 as haven demand grows
12 Mch 2025: Tariffs and the energy transition: Key drivers of copper demand
11 Mch 2025: Gold holds steady despite deleveraging risks in volatile markets
10 Mch 2025: COT Report: Wholesale reductions in speculators' USD and commodity longs
7 Mch 2025: Commodities Weekly: Tariffs, trade tensions, fiscal bazooka, and Ukraine
5 Mch 2025: Tariff threat disconnects HG copper from global market
4 Mch 2025: Stagflation and geopolitical tensions fuel renewed demand for gold
3 Mch 2025: COT Report: Broad retreat sees WTI longs slump to 15-year low
Podcasts that include commodities focus:
23 April 2025: Trump going soft on tariffs versus the direction of travel.
11 April 2025: US and China are slipping into an economic war
4 April 2025: Markets melts down as recession risks go global
1 April 2025: Bracing for Liberation Day
25 Mch 2025: Did Trump just blink?
18 Mch 2025: US market found support, but how durable will it be?
14 Mch 2025: Is silver set to shoot the lights out?
10 Mch 2025: US un-exceptionalism is the theme
7 Mch 2025: US bear market risks ratchet higher. EUR train has left the station
4 March 2025: Are we on the verge of a big whoosh?
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