Copper's Cyclical Correction: A Strategic Buying Opportunity Amid Softening Chinese Demand and Supply Uncertainty

The global copper market in 2025 is at a crossroads. On one hand, structural demand from the energy transition, electric vehicles (EVs), and AI infrastructure is surging. On the other, supply constraints and geopolitical tensions are creating volatility. Yet, amid these dynamics, a contrarian opportunity is emerging: copper's cyclical correction. While Chinese demand shows signs of softening, the broader fundamentals suggest that the metal remains undervalued relative to its long-term trajectory. For investors willing to look beyond short-term noise, this dislocation could represent a compelling entry point.

The Dual Forces Shaping Copper's Trajectory

China's role in the copper market is both pivotal and paradoxical. According to a report by S&P Global, the country accounted for nearly 60% of global refined copper consumption in 2024 and is projected to process 50% of global production by 2040. However, recent data indicates a moderation in Chinese demand growth, driven by economic uncertainties in the property sector and a slowdown in industrial construction. This has led to speculation about a broader softening in the world's largest copper consumer.

Yet, even with this softening, China's demand remains a critical driver of global markets. The electrification of transportation alone is a game-changer: EVs use three times more copper than conventional vehicles, and with EV market penetration expected to double to 44% by 2035, copper consumption will continue to rise. Meanwhile, the expansion of renewable energy infrastructure and AI data centers-each of which requires significant copper for grid connectivity and hardware-further underpins long-term demand.

Supply Constraints and the Deficit Outlook

The imbalance between demand and supply is tightening. Global mine production, which reached 22.8 million tonnes in 2024, is expected to peak at 24 million tonnes by the end of the decade before declining due to falling ore grades and dwindling new discoveries. This has already led to a refined copper deficit of 150,000 tonnes in 2025, with analysts predicting a 30% shortfall by 2035.

China's strategic response to these constraints is instructive. The country is expanding its refining capacity and securing copper concentrate imports from non-traditional sources like Mongolia and Australia. However, even these efforts cannot fully offset the gap. Mine disruptions in Chile and Indonesia, combined with geopolitical factors such as U.S. tariffs on copper products, have further strained supply chains. As a result, copper prices have surged to record highs above $11,200 per metric ton in 2025, but the market remains volatile.

Contrarian Value: Copper vs. Gold and Battery Metals

Here is where the contrarian case emerges. While copper prices have risen sharply, the metal is still undervalued relative to its structural demand and historical metrics. The copper/gold price ratio, for instance, suggests a significant divergence: copper trades at a discount to gold despite its critical role in the energy transition. This is particularly striking given that gold's surge to record highs in 2025 reflects flight-to-safety dynamics, not industrial demand.

Meanwhile, battery metals like lithium and nickel have underperformed in 2025, despite long-term growth projections. Lithium, for example, has traded at a sharp discount to its 2022 highs due to oversupply and margin pressures in Indonesia. This dislocation between short-term price performance and fundamental demand creates an asymmetry in risk and reward for copper investors.

The Case for a Cyclical Correction

The key to unlocking value lies in timing. As the International Energy Agency (IEA) notes, demand is expected to outstrip supply by 30% by 2035. However, the market's immediate reaction to softening Chinese demand and geopolitical volatility could create a cyclical correction.

Such a correction would be driven by short-term factors, not long-term fundamentals. For example, U.S. tariffs on copper products have redirected trade flows, temporarily distorting global pricing mechanisms. Similarly, China's property sector slowdown is a cyclical, not structural, issue. Investors who position for a correction could benefit from buying copper at a discount to its intrinsic value, particularly as refining capacity expansions and green energy investments gain momentum.

Conclusion: A Strategic Inflection Point

Copper's market in 2025 is a study in contrasts: a softening in Chinese demand coexists with a tightening supply-demand imbalance, and a surge in prices is shadowed by volatility. For contrarian investors, this is a strategic inflection point. The metal's role in the energy transition, its undervaluation relative to gold, and the underperformance of competing battery metals all point to a compelling case for long-term investment.

As the market grapples with short-term dislocations, the fundamentals remain intact. Copper is not just a metal-it is a linchpin of the global economy's transformation. And in that transformation lies opportunity.