Copper has strong long-term support, but recent rally may be running ahead of fundamentals

Copper has been one of the standout performers in global commodities this year, with prices rising sharply on hopes of a looming supply squeeze and growing demand from the energy transition.

But according to analysts at RBC Capital Markets, the rally may be a little too hot, too soon.

In its latest outlook, RBC says copper remains one of the most investable themes in global commodities, underpinned by the sector’s role in electrification, infrastructure modernisation, and data centre expansion.

However, the bank warns that current prices are being driven more by market sentiment and financial flows than by real-world tightness in supply and demand.

Short covering

Investor positioning, short covering and narratives around Chinese strategic stockpiling have all contributed to the recent surge.

Yet RBC points out that visible inventories have actually stabilised, Chinese imports remain subdued, and downstream demand, particularly in construction and manufacturing, is still mixed.

That doesn’t mean the bull case is broken. RBC continues to expect a meaningful supply deficit to open up by the latter half of the decade, as mine development lags demand growth.

The bank sees constrained new project approvals, declining ore grades and permitting delays limiting future supply, even as the energy transition fuels more demand from electric vehicles, power grids and renewables.

Still, the near-term picture is murkier. Physical market tightness remains relatively modest, and the risk, RBC says, is that “investors are getting in front of fundamentals” and pushing the price well beyond where marginal cost support would normally sit.

That makes the market vulnerable to pullbacks if sentiment shifts or speculative positioning unwinds.

Forecasts upgraded

In pricing terms, RBC has upgraded its near-term forecasts, but sees more moderate gains ahead, with long-term support expected from a durable deficit story rather than temporary squeezes.

The challenge for investors is timing: the long-term structural case for copper looks solid, but the near-term may offer better entry points as prices oscillate with macro conditions, policy announcements and trading flows.

For now, copper remains in the spotlight, and with supply-side discipline and investment inertia keeping the growth pipeline thin, any meaningful acceleration in demand could tip the balance quickly.

As RBC puts it, copper is “one of the clearest structural winners” of the transition economy, but the path there may not be a straight line.