- Shanghai and LME contracts post sharp gains
- Speculative trading and weak dollar fuel rally
Copper prices surged to record highs on 29 January, extending a broad-based rally across metals as investors increasingly turned to physical assets amid heightened geopolitical risks and a persistently weak US dollar.
On the Shanghai Futures Exchange (SHFE), the most-active copper contract surged 6.7% to close at RMB 109,110/t, after briefly hitting an all-time high of RMB 110,970/t during the session. Meanwhile, the benchmark three-month copper contract on the London Metal Exchange (LME) climbed 6.3% to $13,913/t, having earlier spiked nearly 8% to a record peak of $14,058/t.
The rally has been fuelled by a combination of speculative buying in China, expectations of stronger US economic growth, and increased investment in data centres, power infrastructure, robotics, and AI-related industries. Trading activity on the SHFE has intensified sharply, with January marking the busiest month on record for base metals volumes, while copper registered one of its highest single-day trading volumes ever.
Market participants noted that the surge was largely driven by speculative funds concentrated in Asian trading hours. It is highlighted that periodic bursts of high-volume trading on the SHFE have historically triggered significant moves in global metals markets.
Macro conditions have further amplified the rally. A weak US dollar, hovering near multi-year lows, has supported dollar-denominated commodities by improving affordability for non-US investors. At the same time, rising geopolitical tensions, including renewed concerns in the Middle East following US threats toward Iran, have strengthened demand for tangible assets. Copper’s gains followed record-setting rallies in gold and silver earlier in the week.
So far this year, SHFE copper prices are up around 9%, while LME copper has gained more than 11%, building on momentum from 2025, when prices were lifted by mine disruptions, supply tightness, and trade dislocations linked to US tariff threats.
However, the rally has occurred despite soft physical demand in China, the world’s largest copper consumer. The Yangshan copper premium–a key indicator of Chinese import demand–fell to $20/t, its lowest level since July 2024, suggesting resistance from downstream buyers at elevated price levels.
Outlook
While investor enthusiasm remains strong, prices may have moved ahead of near-term fundamentals, raising the risk of a technical correction if physical buyers continue to resist higher levels, particularly in China. However, expectations of accommodative US monetary policy, sustained infrastructure investment, and rising energy transition demand are expected to continue underpinning bullish sentiment in the copper market.
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