Europe's copper market heads into 2026 carrying the imprint of an extraordinary 2025, a year in which price signals, physical flows and geopolitics diverged sharply. What emerged was not a simple story of shortage or surplus, but a fractured global market in which Europe briefly found itself competing for metal with the US, while China's smelting overcapacity distorted upstream fundamentals. While European supply has stabilised, a projected tightness in 2026 promises higher premiums, particularly if underlying metal prices remain at record highs.
Fractured fundamentals in 2025
Copper prices surged through 2025, with London Metal Exchange (LME) three-month values repeatedly achieving record territory above $11,000/t and briefly approaching $12,000/t in December.
On the surface, the rally appeared to signal a classic supply crunch, driven by mine disruptions at assets such as Grasberg, in Indonesia, and Kamoa-Kakula, in the Democratic Republic of Congo, and structurally strong demand from grids, electrification and data centres.
But the deeper story was more complex. Demand growth was uneven. China's apparent consumption slowed sharply in the second half of the year as stimulus effects faded, while manufacturing activity in Europe remained weak. Yet prices continued to rise, reflecting not so much booming end-use demand as a geopolitical and logistical reshaping of supply.
The decisive factor was the growing pull of copper into the US market on the threat of import tariffs on refined copper. The widening price premium on the Chicago Mercantile Exchange (CME) contract relative to the LME opened a powerful arbitrage that drew metal out of LME warehouses and, by extension, away from Europe. By late 2025, CME stocks accounted for more than half of global exchange inventories, while LME registered stocks fell below 100,000t at points — levels historically associated with acute tightness in deliverable supply.
For Europe, this mattered more than headline global balances. Even as total exchange inventories rose above 700,000t worldwide, availability became tighter in non-US regions, pushing spot and term premiums sharply higher.
LME-CME arbitrage: the key swing factor
The LME-CME arbitrage, which is governed by several interlinked factors — relative interest rates, currency moves, logistics costs, warehouse accessibility and above all, US trade policy — is expected to remain in 2026.
As long as the CME price commands a premium of several hundred dollars per tonne over the LME, the incentive to ship metal into the US persists. In 2025, that premium regularly exceeded estimated freight and financing costs, keeping the arbitrage wide open.
In 2026, tariff-driven uncertainty could trigger further pre-emptive inflows into the US early in the year, sustaining tightness elsewhere — including Europe — before potentially easing later once inventories are built and global supply recovers from 2025 shocks. Conversely, a delay or dilution of tariffs could narrow the spread, allowing some metal to remain or return to LME locations.
European supply and premiums: a new baseline?
European spot premiums eased in September-November as the scramble for cathode outside the US eased, but as major producers have responded to 2025 events by lifting 2026 term premiums aggressively, European spot premiums also surged as sellers look to mirror the new market baseline in the spot market.
Chilean supplier Codelco announced a near 40pc increase in its European premium for 2026 deliveries, taking it to the mid-$300s/t over LME, with Aurubis following with similarly high offers. The Argus assessment for copper cathode grade A cif Rotterdam rose to $210-220/t on 2 December, increasing by more than a third relative to September-November levels.
Trading groups and producers surveyed by Argus indicate a reassessment of risk — producers are pricing in the possibility that Europe becomes structurally "second in line" behind the US for deliverable cathode.
Whether these elevated premiums are sustainable through the whole of 2026 depends on how quickly arbitrage-driven stock movements stabilise. But even if LME stocks rebuild later in the year, the premium reset of 2025 may have established a higher floor for Europe.
Bank forecasts: surplus, but not comfort
Major banks mostly agree that the global copper market remains in surplus in 2026, although the size of that surplus is shrinking.
Goldman Sachs projects a surplus of about 160,000t in 2026, down from roughly 500,000t in 2025, and expects prices to average $10,000-11,000/t.
But the International Copper Study Group points to a possible deficit of 150,000t in 2026, keeping the market on watch. Chinese market participants are expecting non-US supply to tighten significantly as material flows in the US, but some US market participants point to an easing trend.
On paper, these numbers argue against a classic shortage. But the experience of 2025 shows that regional tightness can coexist with a global surplus. For Europe, the key takeaway is that surplus metal may not be available where it is needed, when it is needed, if arbitrage and policy continue to redirect flows.
In that sense, 2026 could resemble 2025 — balanced or a surplus globally, but intermittently tight in Europe.
