Copper prices hit a record high, surpassing $11,000 per tonne, after a trading halt on the Chicago Mercantile Exchange during a busy session. This surge follows the CESCO Week event in Shanghai, which raised expectations for lower supply. Copper has increased about 27% this year, fueled by mine disruptions and changes in trade due to tariffs. China’s main copper smelters have agreed to lower their intake of copper concentrate because of lower processing fees hurting their profits. The China Copper Smelters Purchasing Team, made up of 13 key smelters, plans to cut processing rates by more than 10% next year. Despite these issues, China’s copper production is still strong. China’s refined copper output has remained robust, even with a tough market for feedstock and low treatment and refining charges. These charges have dropped to record lows due to a shortage of raw materials, with spot charges now at minus $60 per tonne. Similar promises were made last year, but they did not lead to major cuts in output. So far this year, China has produced nearly 10% more refined copper. The FXStreet Insights Team shares market insights from experts, incorporating views from various analysts and commercial sources. Copper recently broke its all-time high, reaching over $11,000 per tonne after a lively trading session last Friday. The market is currently strong, buoyed by concerns over supply due to mine disruptions and trade tariffs. This is reflected in dangerously low inventories, with LME warehouse stocks dropping below 50,000 tonnes, a level not seen in almost 20 years. Given this positive outlook, traders might want to look for opportunities to benefit from further price increases. Buying call options on copper futures could help capture gains from the ongoing price rise. The strong demand linked to the global energy transition and the projected increase in electric vehicle sales by 2025 continue to support higher prices. However, caution is needed regarding the anticipated production cuts from Chinese smelters in 2026. A similar commitment was made in late 2024, but China’s refined copper output still increased by nearly 10% through October of this year. While smelters are responding to historically low processing fees, their past behavior suggests that output may not decrease as expected. This uncertainty indicates that price volatility may remain high in the coming weeks. Traders might consider using options strategies like straddles to profit from potential large price fluctuations, as the market assesses whether to believe the supply cut narrative or focus on actual production data. It will be crucial to monitor the upcoming monthly industrial output data from China to look for any real signs of a slowdown.

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