Copper is vulnerable to an unwind in the debasement trade, but that is a side-story, TDS' Senior Commodity Strategist Daniel Ghali notes.

Tight inventories and underinvestment support Copper prices

"For the first time since 2021, macro and micro are no longer at odds in Copper markets. Macro tailwinds associated with an epic AI capex boom were already expected to add roughly 550kt to Copper demand per annum by 2027, providing a meaningful boost to demand growth, even before considering the investments required in the associated power infrastructure and grids."

"A structural underinvestment in mining supply has left Copper markets captive to such tailwinds. China's Five Year Plan has further placed the AI race as a top priority in their agenda, potentially bolstering expectations notably as economists begin to estimate the associated required capex spend."

"From a microstructure perspective, the residual fear of US tariffs continues to keep global inventory pools tighter than would otherwise be the case. For as long as the threat of tariffs persists, the US will starve the world of Copper. Zoom out: an unraveling of the debasement trade would be an ideal set-up for Copper upside."