Copper Prices Near All-Time Highs. Citi: If Strait of Hormuz Is Unblocked, Price Will Rise to $15,000 by Year-End

In the report, Citi forecasts that under a base-case scenario, the blockade of the Strait of Hormuz will persist until the end of May. Amid suppressed global growth demand, even a more significant sell-off in risk assets would likely see dip-buying in the copper market support prices above $12,000 per ton through the second quarter.

In a bull-case scenario, Citi predicts that if the reopening of the Strait of Hormuz drives improved growth expectations and the release of restocking demand, or if the crisis provides a structural boost to energy transition demand, average copper prices could reach $15,000 per ton by year-end. In a bear-case scenario, Citi expects copper prices to fall to $10,000 per ton, but assigns this outcome a weighting of only 20%.

Generally, there is a negative correlation between oil prices and copper prices, as rising oil prices significantly increase manufacturing costs and stifle global economic growth. Copper is regarded as a bellwether for global industrial activity; when economic growth is hit, demand for industrial copper also declines, exerting downward pressure on copper prices. However, in this round of conflict, copper prices have continued to rise overall, gaining approximately 10% since late 2025.

Analysis indicates that the primary reason is that the expansion of structural demand for copper has substantially mitigated the downward risk to total copper demand. Historical data shows that during major economic downturns, such as the second oil shock in the 1980s and the 2008 global financial crisis, copper demand fell by an average of 3% to 5% annually. According to Citi's estimates, assuming structural demand remains constant, if cyclical demand drops by 5%, global refined copper consumption would only decrease by about 1.7%; if cyclical demand falls by just 3%, total global demand would remain largely flat.

Citi even pointed out that, in some cases, high oil prices do not lead to a contraction in copper demand; instead, they may drive copper demand higher by accelerating the energy transition. For instance, under such geopolitical pressure, fuel-importing nations may promote the adoption of renewable energy, naturally increasing copper demand for electric vehicles, energy storage, and power grid infrastructure.

Citi noted another factor in its report: the support for copper prices from military demand. According to Citi's estimates, global military-related copper consumption is approximately 2.5 million tons per year, accounting for about 9% of total global consumption. Furthermore, a global consensus has emerged that international defense budgets will maintain moderate growth, which will support military copper demand remaining at elevated levels.

The equipment intensity of modern warfare continues to increase, with the extensive use of consumable hardware such as drones and missiles accelerating copper consumption. Historical data suggests that following the outbreak of the Russia-Ukraine war, the growth rate of military copper consumption may outpace the growth rate of actual military expenditures.

While copper demand undergoes structural reshaping, its supply side is also being impacted by strait closures. Currently, copper is sourced from two channels: copper scrap recycling and primary copper ore production. Since the beginning of the year, copper mine production expectations have remained largely flat, making scrap recovery and recycling the primary factor influencing copper output.

However, the collection, processing, and remelting of copper scrap are highly dependent on energy and transportation, making a closure of the Strait of Hormuz a critical factor affecting copper production. Such a closure would not only drive up energy prices but also push up transport insurance premiums, fuel surcharges, and other transit fees, thereby dampening suppliers' willingness to engage in copper scrap recycling.

In addition, Citi pointed out that as global trade frictions and geopolitical uncertainty have risen in recent years, governments' willingness to actively increase metal inventories has strengthened, a factor that will also impact copper prices. According to Citi's calculations, if global refined copper inventories rise from the current level of approximately 1.3 months of consumption to 2 months, with the inventory build completed within two years, the required copper price would be roughly $14,423/tonne; if it rises to 3 months of consumption, the price needed for a two-year build would reach as high as $27,885/tonne.

When governments increase copper inventories for strategic reserve purposes, not only does demand rise, but spot market liquidity also tightens, thereby amplifying price volatility and pushing up the spot premium relative to futures.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.