Coils, coiled copper wires, lie on pallets in the coiler plant at Aurubis AG. After being cast and rolled, the hot copper wire is coiled into a coil weighing five tons and measuring twelve kilometers in length.
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Industrial metals have been volatile this week as rising inflation fears put more pressure on global bond markets.
Copper futures for August delivery fell 1.3% on the London Metals Exchange on Tuesday, before rebounding 0.5% on Wednesday to $13,477 a tonne. Steel – used in a variety of goods including electrical cables, machinery and pipes – is widely seen as a commodity in the global economy.
What has copper futures for August delivery been like over the past month.
Aluminum, nickel, tin and zinc fluctuated similarly between gains and losses.
The moves came amid broader trading volatility in global bond and equity markets. Global stocks have been volatile as investors assess corporate earnings and US Treasury yields, which rose to a decade high.
Analysts told CNBC that the outlook for many industrial metals was clouding as problems unfolded on both the supply and demand sides.
Zinc
In a letter last week, Macquarie strategists said the potential risks of zinc are limited to demand pressures, given that about 55% of end-use demand is still being built and is therefore vulnerable to any economic downturn.
On the supply side, higher costs of diesel, acid and explosives weigh more heavily, but this should not be a problem for steel prices,” they said.
“Energy prices in Europe are a major risk for European zinc smelters, although energy prices will still show a strong reaction to conditions in the Middle East.”
Aluminum
Similar uncertainty has also emerged in aluminum, where “structurally strong supply is set against weak demand” in Europe and North America, according to Shashank Sriram, senior metals analyst at Wood Mackenzie.
Aluminum is an important material in all electronics, transportation, and construction, as well as other industries such as solar panels and packaging. About 9% of the world’s aluminum supply comes from the Gulf, and many firms there have been unable to export the metal beyond the region since Iran effectively closed the Strait of Hormuz.
“As the conflict continues, supply risks come into focus,” Sramram told CNBC.
“Even in the event that the Strait is reopened, the supply shock is not immediately reversible – beyond the displacement of vessels and the disruption of raw materials, the resumption of smelters following controlled closures and uncontrolled damage will be slow, meaning that the recovery will be completed in stages rather than quickly.”
As such, Wood Mackenzie sees “insufficient demand momentum to support a move to $4,000 per tonne” in the near term.
Copper: ‘Macro vs. micro tug-of-war’
An improved narrative that lifted copper to 2025 remains supportive of prices, led by a shortage of mining supplies and strong demand for energy transitions, Alice Fox, commodities strategist at Macquarie, told CNBC in an email.
“Emotionally driven” prices, he added, are caught between demand for the red metal and fears of higher interest rates.
Charles Cooper, head of copper research at Wood Mackenzie, told CNBC that metal prices have been very volatile but have held historically high levels of around $13,500 a tonne.
“Although prices recently hit a record high of US$14,500/t, they are now consolidating below those levels,” he said in an email. “Absolutely higher prices have created a wave of caution in the Chinese market, allowing broader macroeconomic headwinds to drive two-way volatility.”
Cooper added that the large disparity between the US and China bond markets is causing significant financial volatility.
“In the US, rising inflation expectations increase Treasury yields, which supports a strong US dollar and causes occasional profit-taking in long copper positions,” he said.
“On the other hand, China’s government bond yields are nearing historic lows, reflecting a sluggish domestic manufacturing and real estate industry that is currently struggling to supply the necessary demand to finance the next leg of the move.”
Despite these major pressures, the physical market remains highly sensitive to continued risks of supply disruptions, according to Wood Mackenzie. The return to full operations at the world’s second largest copper mine, Grasberg in Indonesia, has been delayed until 2028 following a deadly mudslide in 2025.
Flooding at the Kamoa-Kakula mine in the Democratic Republic of Congo and an accident at the El Teniente mine in Chile also affected shipments last year.
Cooper added that much of the copper used was still stuck in US warehouses following a buildup of tariffs, limiting wider market availability.
“Overall, copper shows the classic macro vs. micro tug-of-war,” he told CNBC.
While structural, nearly price-inelastic demand drivers — such as grid expansion and AI data center infrastructure — continue to support the long-term narrative, Cooper noted that data center-related usage has yet to be fully proven in physical markets.
“Against a backdrop of relatively soft conditions and high inventory, this suggests that the market may be pricing in part of the long-term issue prematurely,” he said. “For now, this leaves copper in the $13,200–$13,800 tonne range, with further calls for a tightening of global bond yields and a clear recovery in Chinese industrial activity.”
