Copper is Overpriced and Oversupplied, Macquarie Analysts Say

Towards the end of last week, the price of copper dropped by over 1% to reach $5.43 per pound. Thus far, the red metal’s price has reduced by more than 16% from its January high. A recently conducted analysis shows that copper’s sharp price increase from last year was primarily driven more by investor activity than by underlying market fundamentals. 

The analysis, conducted by Macquarie Strategy’s analysts, was based in cities like Singapore, Geneva, Houston, Shanghai, and London. 

In their report, the analysts note that trading volumes for base metals on the Shanghai Futures Exchange rose by 80% in January compared to December, indicating a surge in speculative interest. They also highlighted that total interest in copper contracts across Shanghai, London, and New York rose by more than $9 billion between December and January, before sharply declining between February and March, a shift that coincided with falling prices. 

This pattern, they explained, reinforced the view that financial flows, rather than physical supply constraints, were the primary force behind the rally. According to the bank, the market is currently overpriced and oversupplied, with little sign of genuine shortages. 

Figures show that global visible inventories have expanded significantly, increasing by over a million tons since the beginning of last year. COMEX inventories have climbed to record highs while stocks on the London Metal Exchange have reached their highest levels in more than 5 years. 

Additionally, estimates show that nearly 500,000 tons of the red metal are being held off-exchange in America, largely due to arbitrage opportunities between LME and CME pricing. This buildup of excess metal in America has contributed to a misleading perception of tight supply in other regions. 

Even so, the price gap between CME and LME continues to draw copper into the U.S. as traders anticipate a possible decision on copper imports. While shifts in the country’s critical minerals policy may reduce the likelihood of tariffs, uncertainty remains and continues to shape trade flows. 

On the demand side, lower prices have encouraged Chinese buyers to re-enter the market, as reflected in a recent decline in inventories. However, demand outside China remains weak. Spot premiums are significantly below contract prices, and there is limited interest in physical purchases suggesting that previously high prices have curtailed consumption in major markets. 

At the same time, supply continues to rise, reinforcing Macquarie’s estimate that the market was already in surplus by over 600,000 tons in 2025. 

In the near term, the bank expects macroeconomic factors to play a larger role in price movements than supply-demand fundamentals, leading to continued volatility influenced by investor sentiment and geopolitical developments. 

Copper industry players like Numa Numa Resources Inc. may be little swayed by the current price movements because the long term outlook suggests that demand will keep rising while supply constricts as electrification and AI technology require massive amounts of this critical metal. 

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