Supply disruptions, inventory drawdowns, and a weakening US dollar have combined to push copper prices to record highs. The core drivers are believed to stem from multiple factors including mine supply disruptions, declining global inventories, and a softer dollar. First, copper supply from Chile continues to weaken. Second, the Democratic Republic of the Congo (DRC) has further tightened its copper concentrate export policies. Third, global copper inventories are consistently declining. Fourth, the weakening US dollar amplifies copper's financial attributes.
The combination of these factors has driven copper prices to record highs. The core drivers are likely from multiple factors including mine supply disruptions, declining global inventories, and a weaker dollar. First, copper supply from Chile continues to weaken. In the second quarter of 2026, Chile's copper output fell 7.7% year-on-year to approximately 1.27 million tonnes, the lowest for the same period since 2007, with structural issues such as mine aging and declining ore grades remaining unresolved. On August 4, Chile's state-owned Codelco suspended part of the expansion project at the El Teniente mine due to earthquake risks, further strengthening market expectations of insufficient future copper mine growth.
Second, the DRC government issued an order in August banning the export of copper and cobalt concentrates, though the short-term impact on global refined copper supply is likely limited. Third, global copper inventories are consistently declining. Deliverable inventories at major exchanges are falling, and spot supplies are tight, making supply disruptions more easily transmitted to prices. Fourth, the weakening US dollar amplifies copper's financial attributes. A weaker dollar reduces procurement costs for non-dollar regions and enhances the financial nature of commodities, further increasing copper price elasticity.
Overall, this round of copper price highs is not driven solely by demand recovery, but results from the combined effects of "mine disruptions, inventory drawdowns, and a weaker dollar." In the short term, production at Chilean mines, DRC export policies, and global inventory changes remain the core variables for copper prices. In the medium to long term, the aging of global copper mines, long lead times for new capacity, and sustained demand from AI computing, grid construction, and new energy sectors will continue to support copper demand, with the tight supply-demand balance likely to persist.
Overseas Market Review (August 3-7)
The US-Iran conflict significantly eased, leading to a broad rebound in global major stock indices. This week, hopes for US-Iran negotiations were rekindled, with expectations of the reopening of the Strait of Hormuz increasing. Negotiations regarding a temporary agreement to reopen the Strait of Hormuz have been ongoing for weeks, with the discussed agreement setting a 60-day temporary arrangement to be jointly executed by Oman and Iran, with the possibility of extension. International oil prices fell sharply. The easing of Iran tensions, a slight weakening of the US dollar, and a significant decline in US Treasury yields occurred. The dollar was largely flat for the week. Oil prices fell sharply, and Treasury yields across maturities dropped significantly. This week, oil prices experienced a steep decline. The significant easing of US-Iran tensions and progress in negotiations led to a sharp drop in international oil prices. Gold, silver, and copper prices all rose this week. The cooling of US-Iran tensions, a slight decline in the dollar index, and a broad rebound in precious metals were observed.
Overseas Central Bank Actions
Last week, several Federal Reserve officials made statements, maintaining an overall hawkish stance. On August 4, Schmid indicated that tighter monetary policy is needed to bring inflation back to the 2% target, while Kashkari believed that it was time to start gradually raising interest rates. On August 5, Cook stated "we are prepared to raise rates if the trend of inflation decline does not resume." On August 6, Musalem predicted an increased likelihood of inflation persistently exceeding the target, favoring a rate hike at the recent FOMC meeting. This week, market expectations for a rate hike within the year decreased. As of August 9, the CME model showed that the market expects a 0% probability of a rate cut this year (same as a week ago), a 22.9% probability of maintaining rates unchanged (up from 12.1% a week ago), and a 77.1% probability of a rate hike within the year. Among these, the market currently expects a 44.5% probability of one rate hike, a 27.4% probability of two rate hikes, and a 5.2% probability of more than two rate hikes within the year.
US-Iran Situation Developments
This week, the Iran situation remained a focus of overseas current affairs, with the US-Iran tensions overall cooling. On August 3, Trump stated that the first phase of negotiations with Iran was to reopen the Strait of Hormuz, and the second phase was denuclearization. Trump claimed the Strait of Hormuz might reopen as early as the next day. On August 4, Iran stated that talks with Oman regarding the Strait of Hormuz had made "positive progress," with reports indicating it had abandoned the "two-way full control" policy and was, for the first time, considering allowing European minesweeping. On August 5, Iranian Foreign Ministry Spokesperson Baghaei stated that the negotiations between Iran and Oman were "professional and productive," and an agreement had been reached on the geographic coordinates of the proposed new shipping route.
High-Frequency Overseas Fundamental Tracking
Overall Economic Expectations: In the past week, market expectations for US economic growth in 2026 increased compared to the previous week. Employment: Initial jobless claims came in lower than expected, staying below 200,000 for the third consecutive week. Demand: US retail sales growth increased, transportation growth decreased, mortgage rates rose, and real estate market activity declined. Production: US crude steel production and refinery utilization rates remained strong. Prices: US retail gasoline prices fell this week, and inflation expectations declined. Financial Conditions: US credit spreads widened this week.
Key Overseas Focus for Next Week (August 10-14)
Developments in the US-Iran situation, the US July CPI, and the US August University of Michigan Consumer Sentiment Index are among the key items to watch.
Risk Warning: Risks include changes in overseas economic fundamentals exceeding expectations, unexpected policies from the Trump administration, and unforeseen developments in the Middle East situation.