The headline move is simple: copper erupted. On January 29, 2026, benchmark three-month copper on the London Metal Exchange (LME) hit a record $14,527.50/ton intraday before settling far lower on the day—still up, but no longer “limitless.” The scale of the move mattered as much as the level: it was the kind of day that forces risk managers to reprice volatility, triggers systematic trend-following flows, and punishes anyone running tight stop-losses.
What’s powering it? The rally has a familiar cocktail: speculative buying, short-covering, and a weaker U.S. dollar backdrop that can inflate dollar-denominated commodity prices and attract cross-asset “hard asset” allocations. But copper is not gold. Its demand base is industrial—construction, power grids, manufacturing—so when the price jumps too far too fast, the market starts asking the uncomfortable question: how much of this is real demand, and how much is positioning?
That’s why the intraday reversal is the story inside the story. When prices swing by four figures in a session, it’s a warning that liquidity is being tested—and that “good news” can quickly become “forced selling” if margin requirements rise or portfolios de-risk elsewhere.
China Futures Hit Records Even as Spot Signals Soften
A second tension point: copper’s price action has been loud, but parts of the physical demand picture have been quieter. The most-active copper contract on the Shanghai Futures Exchange (SHFE) also set a record, rising sharply even while reports pointed to sluggish physical demand in China and softening spot signals.
This divergence matters because China is the world’s largest copper consumer. When futures run ahead of spot demand, it doesn’t automatically mean the rally is “wrong”—it may reflect expectations of future infrastructure spending, electrification, robotics, data centers, and grid upgrades that require copper intensity. But it does raise the probability of a “reset” if end-users push back at these prices, delay purchases, or substitute where possible.
Reuters also described the situation as an investor dilemma: momentum is powerful, but the higher prices go, the more they can erode industrial demand and invite institutional risk aversion. In practice, that often shows up as reduced spot buying, wider bid-ask spreads, and a market that becomes more sensitive to any macro headline—Fed expectations, dollar moves, geopolitical stress, or equity selloffs.
Spreads and Inventories Flash Tightness—Then Flip, Showing Fragility
If you want the “truth serum” in industrial metals, watch the spreads. In late January, the LME cash premium over three-month copper briefly spiked above $100/ton—a classic sign of near-term tightness or urgent demand for prompt metal—then flipped into a discount shortly after.
That flip is revealing. It suggests a market where tightness can be real—but also where it can be episodic, driven by logistics, financing, or short-term positioning rather than a steady, uniform shortage. When spreads collapse, it can mean supply has loosened at the margin, demand has hesitated, or traders have unwound inventory plays.
This is why the copper tape has started to look “two-speed”: explosive rallies on flow-driven days, and sudden air pockets when the market hits a constraint (profit-taking, margin calls, or just buyers stepping back). The Financial Times described the broader metals complex as a “whiplash” environment, with abrupt reversals tied to profit-taking and forced liquidation dynamics.
Forecasts Rise, Deficits Widen—But Demand Destruction Is the Wild Card
The final piece is fundamentals—just with a caveat: fundamentals can justify a trend, but rarely explain the speed of it.
In a Reuters poll, analysts lifted the 2026 average copper price forecast to $11,975/ton (above $11,000 for the first time), and raised the projected market deficit to 238,500 tons, pointing to supply disruptions and constraints. Reuters also highlighted that mine issues—including at Indonesia’s Grasberg—have fed deficit concerns.
Still, analysts have been blunt about the risk: prices that move too far above what the physical market can absorb can trigger demand destruction—buyers delay, throttle usage, or pass costs down the chain until something breaks. Add the calendar effect (China holiday-related liquidity shifts) and the market becomes prone to sharp “gap” moves—up or down—on relatively modest news.
Bottom Line
Copper’s breakout above $14,000 is the clearest signal yet that 2026 is shaping up as a high-volatility commodities year: a mix of supply anxiety, macro tailwinds (USD moves and risk hedging), and aggressive speculative participation. The near-term roadmap is likely defined by whether spreads re-tighten (confirming physical stress) or stay loose (hinting the rally is outrunning demand), while updated deficit estimates keep the structural bull case alive—but not immune to a fast correction.