Copper prices continue to trade near record highs, reinforcing the narrative of tight supply and structural deficits driven by the energy transition. However, a closer look at the physical market fundamentals paints a very different picture.
What is physical data actually saying?
1) Global inventories are surging
Global copper stocks across LME, CME, and SHFE have crossed 1.1 million tons, the highest level since 2004. Since the start of 2026 alone, inventories have risen by roughly 300,000 tons, suggesting softer demand at elevated prices.
2) The U.S. tariff arbitrage trade is fading
In 2025, tariff-driven arbitrage pulled large volumes into CME warehouses. But as tariff expectations ease, that trade is unwinding removing a key pillar of physical tightness in the U.S. market.
3) China is not absorbing metal
China’s import demand has weakened, SHFE inventories are climbing, and Chinese metal is flowing back into LME warehouses. This is a classic signal of slack demand, not shortage.
4) Futures curves are in contango
Across exchanges, spreads have shifted into contango, which typically indicates ample supply and storage availability, not scarcity.
So Why Are Copper Prices Still Elevated?
The answer likely lies outside the physical market. Speculative positioning and structural narratives, especially around electrification, EVs, and energy transition, are keeping investor sentiment bullish. Financial flows are dominating price discovery, even as physical fundamentals weaken.
The Key Takeaway
Copper is increasingly behaving like a macro-financial asset rather than a pure industrial commodity.
While long-term structural demand remains real, near-term fundamentals suggest the market is less tight than prices imply. In this extremely volatile market, TransGraph works like an external research arm to organization, Subscribe to our services or book a free demo.