Copper's Rally Amid Supply Constraints and Tariff Uncertainties: Technical Breakouts Signal a Bullish Turn

The global copper market is at a pivotal juncture, with tightening physical supply, geopolitical trade tensions, and technical chart dynamics aligning to create a compelling bullish case. Declining LME inventories, tariff-driven inventory shifts, and key price breakouts suggest a potential upward trajectory for copper prices, making strategic long positions attractive for risk-aware investors.

Supply Constraints: The Inventory Crisis Deepens

Copper's physical market is in a state of imbalance, with LME stocks plummeting to 83,000 tons by June 2025—the lowest level since August 2023. This decline, driven by withdrawals from Rotterdam warehouses (primarily Russian-origin copper redirected to China), reflects a stark shift in global trade flows. Meanwhile, the Shanghai Futures Exchange (SHFE) inventories have hit their lowest since 2022, underscoring Asia's insatiable demand, which accounts for 74% of global consumption.

The supply squeeze is exacerbated by geopolitical risks. The U.S. Section 232 investigation into copper imports—targeting China's dominance—has forced traders to shift inventories to U.S. warehouses, swelling stocks there to 100,000+ tons. This geographic reshuffling has narrowed the price spread between LME and CME contracts but highlights a fragmented market struggling to meet demand.

Technical Breakouts: Price Action Signals a Turn

Copper's price action since early 2024 has been marked by a bullish ascending triangle pattern, with resistance at the $10,000/ton threshold. On March 25, 2025, the LME 3-month price broke above this level to $10,011/ton, a key technical milestone.

Key technical indicators support the bullish thesis:
- RSI (14) has crossed into overbought territory (70+), signaling strong buying pressure.
- MACD shows a bullish crossover, with the histogram rising above the signal line.
- The 200-day moving average at $9,600/ton now acts as critical support, with prices holding above this level since April 2025.

Investment Strategy: Long Copper with Defined Risk Parameters

The confluence of low inventories, geopolitical tensions, and technical strength makes long positions in copper futures or ETFs (e.g., COPX) prudent for investors with a 6–12-month horizon.

Recommendation:
- Buy Point: Enter long positions at $10,200/ton, targeting $11,000/ton (a 7.8% gain).
- Stop-Loss: Set stops below the $9,800/ton support level to limit risk to 4%.
- Risk Management: Allocate no more than 5% of a portfolio to copper exposure, given macro risks like a potential U.S.-China tariff resolution or oversupply from South American mines.

Risks to the Bullish Case

• Tariff Resolution: A sudden easing of U.S.-China trade tensions could reduce speculative inventory shifts, easing price pressure.
• Supply Surges: New production from the DRC's Kamoa-Kakula mine or Peru's Quellaveco could offset deficits.
• Demand Downturn: A global recession could slash industrial demand, though green energy and EV adoption provide long-term support.

Conclusion: A Tight Market Demands Aggressive Buying

With LME stocks at decade lows, technical momentum breaking higher, and geopolitical tailwinds keeping traders on edge, copper is primed for a sustained rally. Investors should prioritize exposure to the metal through futures or ETFs, balancing the bullish case with disciplined risk controls. As the old trading adage goes: “A rising tide lifts all boats”—but only if you're in the water.”