Metals on fire: What's driving the unstoppable rally in copper, aluminium, and zinc

Base metal prices have witnessed a remarkable rally over the past few weeks, with copper, aluminium, and zinc leading the charge across major global exchanges. Copper prices have surged past the psychological $10,000 mark on the London Metal Exchange (LME), while on India’s MCX platform, they are hovering near record highs. Similar bullish momentum is evident in top consumer China, reflecting a synchronised global upswing. Aluminium prices have climbed to three-year highs, breaching ₹264 per kg in India, and zinc prices are trading at multi-month highs overseas and record levels domestically.

This surge in base metal prices is not merely a speculative run; it is rooted in a complex interplay of supply constraints, robust demand, geopolitical tensions, and policy shifts.

Supply Disruptions: Copper production has been hit by a series of disruptions at major mines. Accidents at Chile’s El Teniente mine, protests in Peru, and a deadly mudslide at Indonesia’s Grasberg mine have collectively removed hundreds of thousands of tonnes from global supply.

Infrastructure and Green Energy Demand: Global infrastructure spending and the transition to renewable energy are fuelling demand for metals like copper and aluminium. Copper, essential for electrification, is in high demand for EVs, solar panels, and grid upgrades.

Weakening US Dollar: A softer dollar makes dollar-denominated commodities cheaper for foreign buyers, boosting demand. This has particularly benefited copper and aluminium.

Investor Sentiment: With inflationary pressures and economic uncertainty, investors are turning to commodities as a hedge, further driving up prices.

Global Demand and Supply Dynamics

The global base metals market is currently navigating a tightrope between rising demand and constrained supply.

Demand for copper continues to outpace supply. Forecasts indicate a potential deficit in the coming years due to a lack of new mining projects. The energy transition is a major driver, with copper usage expanding in EVs, wind turbines, and smart grids.

In the case of aluminium, demand is rising, especially in China, driven by renewable energy and transportation sectors. However, supply remains tight due to energy-intensive smelting processes and geopolitical constraints.

Meanwhile, though global production is expanding, zinc demand is also rising, particularly in the construction and automotive sectors. China’s zinc consumption is expected to grow, albeit at a slower pace than in previous years.

Geopolitical Tensions and Their Impact

Eastern Europe and Middle East conflicts, along with sanctions on Russia, a key aluminium producer, and instability in African copper-producing nations, have disrupted supply chains. Likewise, we are witnessing South China Sea tensions as well. Maritime disputes are affecting shipping routes, adding logistical challenges and costs to metal transportation. In addition, the resurgence of trade protectionism under President Trump has added another layer of complexity.

Trump’s Tariffs and Global Supply Chains

President Trump’s renewed tariff strategy has imposed blanket duties on steel and aluminium imports, triggering retaliatory measures from key trading partners. These tariffs have disrupted global supply chains, increased costs, and forced companies to seek alternative sourcing strategies.

At the same time, the tariffs have accelerated the adoption of recycling and reuse practices, especially in aluminium and critical minerals, as companies seek cost-effective alternatives.

China’s Demand: Still a Dominant Force

China remains the world’s largest consumer of base metals, accounting for over 50% of global usage. While demand was robust in Q1 2025, recent data suggests a cooling trend.

copper and aluminium demand grew significantly, driven by EV sales and solar installations in the first quarter, inventory build-up and increased exports indicate a slowdown in domestic consumption by the second quarter. Stimulus measures and infrastructure projects continue to support long-term demand. Meanwhile, despite short-term fluctuations, China’s strategic focus on green energy and urban development ensures sustained demand for base metals.

Looking ahead, the recent rally in base metal prices reflects deeper structural shifts in the global economy. From supply disruptions and green energy transitions to geopolitical tensions and tariff wars, the market is being reshaped in real time. While prices may face corrections in the short term, the long-term outlook remains bullish, especially for metals like copper and aluminium that are central to the future of energy and infrastructure.

(The author is Head – Commodity Research, Geojit Investments Limited)

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)