Copper futures advanced for a fourth consecutive session on Thursday, inching closer to all-time highs, as persistent near-term supply tightness outweighed the impact of massive deliveries that recently alleviated one of the largest short squeezes in the metal's history on the London Metal Exchange.

At the time of writing, LME copper was up 0.35% at $14,413.03 per metric ton, having touched an intraday high of $14,437.40, approaching the record peak of $14,527.50 set in January of this year. The recent surge in prices has been fueled by traders positioning for potential US tariffs on refined copper imports under the Trump administration, which has diverted substantial metal flows to the United States and drained inventories across the rest of the globe.

Shipping data compiled by IHS Markit indicates that approximately 56,000 tons of copper arrived in the US during the first two weeks of August. Excluding the record 223,000 tons imported in July, August's intake is broadly in line with the monthly average observed over the past year. Notably, despite the June 30 deadline for Commerce Secretary Howard Lutnick to submit tariff recommendations having passed, the White House has yet to announce a final policy. Producers, consumers, and traders are closely monitoring whether Trump will extend existing trade protections on semi-processed copper products to include raw materials like refined copper.

Meanwhile, data from consultancy Project Blue shows that global copper supply contracted by roughly 338,000 tons in the first half of this year, due to mining disruptions in Indonesia, the Democratic Republic of Congo, and Chile. With long-term demand growth driven by artificial intelligence, renewable energy, and grid infrastructure, any operational setbacks at mines are compounding supply pressures. This situation ultimately led to a sharp widening in LME copper's time spreads last week, with spot prices at one point trading more than $500 per ton above three-month futures.

Although that spread has since narrowed, it remains significantly elevated relative to normal levels. On Wednesday, the September contract was trading $150 per ton above the October contract, compared with a gap of less than $50 over the previous weekend. Additionally, easing concerns over geopolitical conflict in the Middle East has lent support to copper prices. Reports indicate that Iran and Oman issued a joint statement on August 25 proposing a mutually agreed-upon safe maritime corridor in the Strait of Hormuz.

According to the statement, the proposed framework includes establishing a jointly agreed safe shipping lane, developing common arrangements for its operation, setting up a coordination mechanism involving both nations' coast guards, and maintaining coordination on the strait's future management, information exchange, traffic control, and related navigation and safety services. The statement noted that, given the current situation in the strait and the severe consequences of recent conflicts, the two sides discussed a phased framework to provide a practical basis for subsequent efforts. Iran's Deputy Foreign Minister Gharibabadi said that under the new understanding, routes entering the Persian Gulf would pass through Iranian waters, while routes leaving would transit Omani and Iranian waters, with military vessels barred from the strait and only commercial ships permitted.

However, Gharibabadi also clarified that the understanding does not mean the strait will reopen immediately, as the arrangement is temporary, with negotiations on a permanent new route to begin within 30 to 60 days. In a separate development, US Secretary of State Marco Rubio has reportedly told several allied foreign ministers that Washington does not currently anticipate launching new strikes against Iran, with focus shifting to other pressure measures including economic sanctions. The State Department is preparing to send evacuated diplomats back to the Middle East, potentially as early as this week, a move that markets interpret as signaling that a full-scale regional war is not expected.

Over the medium to long term, copper prices are expected to remain well-supported. On the demand side, copper is widely used in electric vehicle batteries, data centers, and numerous other applications. Amid the global surge in AI computing infrastructure spending, data centers have emerged as veritable "new copper mines." This traditional industrial metal, with its irreplaceable electrical and thermal conductivity, has become a core material underpinning the development of the AI industry. Morgan Stanley forecasts that global data center copper consumption will rise to 740,000 tons in 2026, contributing 0.6 percentage points to global copper demand growth. By 2027, data center consumption is projected to reach 1 million tons (2.8% of total demand), further increasing to 1.3 million tons (3.3%) in 2028, representing a compound annual growth rate of 40%.

Jefferies estimated in an earlier report that global copper demand will reach 30.93 million tons by 2030, with a compound annual growth rate of 2.1% from 2025 to 2030. Among key sectors, electric vehicles lead with 9.6% growth, followed by data centers at 6.1% and renewable energy (wind and solar, excluding grid) at 6.7%. On the supply side, output is struggling to keep pace, with global copper supply projected at just 30.09 million tons in 2030, implying a deficit of approximately 840,000 tons. Jefferies stated bluntly: "Even in a world where global GDP growth is only 2%, the copper market will still see a significant supply-demand shortage over the next 12 months and beyond."

This suggests that the core driver of the current copper rally is not short-term exuberance fueled by macro sentiment, but rather a genuine "physical shortage" on the supply side. The copper market may be moving away from its historical pattern of "three years up, two years down," and is likely entering a multi-year period of supply-demand mismatch.