Investors Say Copper is Strongly Bullish, Can Withstand AI Pullback

Many analysts have been voicing their concerns that the AI boom could face a major correction and bring down other markets, such as commodity markets. However, investors say copper is in a structurally bullish market and the metal can survive if the AI boom unwinds. They point to several factors as the reason for their optimism.

Taylor Melvin, the chief executive of Ivanhoe Electric, says there is a rush by different governments and regions to obtain supplies of key metals for economic, technology and national defense reasons. This has led to the stockpiling of critical metals, such as copper, and that has created upward pressure on prices of the metal. This price support is unlikely to roll back any time soon.

Additionally, investors are pointing to shrinking inventories in China, the main consumer of copper on the globe. As inventories contract, premiums on metal shipped to Shanghai are rising and this is likely to intensify as existing stocks in the country are depleted. Prices can only keep going up in such circumstances, and that is stoking investors’ confidence in the price trajectory of copper.

Concerns about supply are also stoking bullish sentiment in global copper markets. Adverse weather, declining ore grades, accidents at mining sites, and aging mines in key production regions are all clouding the mid- to long-term supply outlook of copper on global markets. As supply remains stagnant or experiences periodic shocks, prices will stay elevated and even climb suddenly on news impacting market expectations.

The U.S. tariff situation is also supporting prices. Trump has kept quiet, either deliberately or inadvertently, about the possibility of imposing import tariffs at the start of next year as the Commerce Department had recommended. Consequently, copper stockpiles in the U.S. exceed what the country usually needs because traders want to have as much metal in the country as possible ahead of any tariff announcement.

This has created an imbalance in metal availability around the world, with the U.S. having excess supply while London and Shanghai experience dwindling inventories. This artificial shortage is boosting copper prices and could continue supporting elevated prices until a final tariff decision is made, if it is ever made.

Melvin makes a strong assertion about the copper industry at this time: he says this is a very good time to be in copper mining. What he doesn’t add is that the same also holds true for entities like Numa Numa Resources Inc. that are engaged in exploration and mine development programs aimed at addressing the ballooning demand for this critical metal.

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