Copper prices rose far beyond expectations! Goldman Sachs raises first-half price target, but still insists on 'post-U.S. tariff correction'

**Source**: Wall Street Insights

**Author**: Long Yue

Driven by factors including "U.S. stockpiling" and the AI boom, copper prices have surged 22% in a month to $13,387 per ton. Goldman Sachs has raised its short-term price forecast to $12,750 per ton but warns that the elevated copper prices are unsustainable, as the market is ignoring the fact of a global copper surplus. The bank maintains its forecast that prices will drop back to $11,200 per ton by the end of the year, noting that the subsequent clarification of U.S. tariffs on refined copper will be a key catalyst for the price correction.

The skyrocketing copper prices have forced Goldman Sachs to re-examine its short-term outlook, yet the Wall Street giant still believes that once the U.S. tariff policy is finalized, the gravitational pull of supply-demand fundamentals will take effect again.

According to news from the Zhuifeng Trading Desk, the latest research report released on January 8 by the analyst team led by Eoin Dinsmore of Goldman Sachs Commodities Research shows that copper prices have experienced drastic fluctuations over the past month or so, soaring from below $11,000 per ton at the end of November to a high of $13,387 per ton on January 6, representing a whopping 22% gain. In the face of this trend, Goldman Sachs acknowledges that prices have exceeded its estimated fair fundamental level of around $11,400 per ton.

Nevertheless, this "over rally" is not without reasons. Goldman Sachs points out that the massive influx of investor capital and low inventories in ex-U.S. markets have added a significant "scarcity premium" to copper prices. More importantly, market expectations of impending U.S. tariffs on copper have led to heavy stockpiling of the metal in the U.S. market. Based on this, Goldman Sachs has decided to raise its forecast for LME copper prices in the first half of 2026 from the previous $11,525 per ton to $12,750 per ton.

But investors should not be carried away by the current prosperity. Goldman Sachs explicitly states that it does not believe prices above $13,000 per ton can be sustained. The bank keeps its Q4 2026 price forecast unchanged at $11,200 per ton and expects a price correction to occur in Q2.

### Dual Drivers: Overheating Macro Narrative and AI Boom

Goldman Sachs' analysis indicates that three major themes are driving the current round of copper price increases:

1.  **Tight signals in the spot market**: In early December, requests to withdraw metal from LME warehouses surged, confirming supply tightness in ex-U.S. markets.

2.  **Frenzy around AI and data centers**: Despite some fluctuations in mid-December, the construction boom surrounding AI data centers continues to attract capital inflows into the copper market.

3.  **"Run it hot" macro narrative**: This is the final catalyst fueling the rally. As the market expects accelerating U.S. economic growth and accommodative monetary and fiscal policies, anticipation of a cyclical demand rebound has driven a strong start-of-year rally in copper and risk assets more broadly.

This macro narrative has even overshadowed underlying fundamental weakness. Goldman Sachs' Equity Strategy team notes that accelerating U.S. economic growth should drive gains in cyclical stock sectors, and this sentiment has spilled over into the copper market.

### Tariff Finalization Marks the End of Stockpiling

Goldman Sachs' core argument is that the current rally is built on the specific behavior of "U.S. stockpiling".

Analysts believe that Q2 will be a critical turning point, when the U.S. decision on tariffs on refined copper is likely to be announced. Once this decision is clarified, it will signal the end of U.S. stockpiling, and market focus will shift back to the global copper surplus.

According to CCTV News, on July 30 last year, U.S. President Trump signed a proclamation announcing that starting August 1, a 50% tariff would be imposed on semi-finished copper products such as copper pipes, wires and cables, as well as copper-intensive manufactured goods, while exempting refined copper—the mainstream of international trade—including cathode and anode copper. However, the prospect of import tariffs on refined copper has not been completely ruled out. The U.S. Department of Commerce has proposed deferring the imposition, planning to levy a 15% tariff starting in 2027 and raising it to 30% in 2028. Trump has instructed the department to provide an update on the U.S. copper market by the end of June 2026.

Notably, Goldman Sachs has revised its tariff expectations. Given that the White House recently delayed a tariff hike on wood products (citing affordability concerns), the bank believes the likelihood of refined copper tariffs being deferred or not implemented at all is increasing.

- **Base case scenario (45% probability)**: A 15% tariff is announced in mid-2026 but deferred to 2027 for implementation.

- **Deferral scenario (40% probability)**: The tariff decision is directly postponed to 2027.

If the latter scenario plays out—i.e., tariff deferral—it would be bearish for LME copper prices, as the absence of tariff threats would refocus the market on the well-supplied global copper market.

### Underlying Concern: Global Surplus

Beneath the surface of prosperity, the fundamentals of the global copper market are actually quite fragile.

Data shows that the global copper market recorded a surplus of 6 million tons (600kt) in 2025, the largest absolute surplus since 2009. For 2026, Goldman Sachs has raised its global surplus forecast from 160kt previously to 300kt.

In addition, due to the diminished attractiveness of U.S. import arbitrage windows, Goldman Sachs has also lowered its forecast for U.S. copper stockpiles in 2026 from 7.5 million tons to 6 million tons.

### Speculative Positions Hit Record Highs, But the Peak May Not Be Here Yet

For the market, the most dangerous signal comes from the positioning structure.

Goldman Sachs warns that current speculative positions are already at historically high levels, which usually indicates that the rally is in its late stages. However, prices may still find support until the three pillars of "U.S. economic growth, AI spending, and U.S. stockpiling" collapse.

Looking at historical data, while positions have hit record highs, the proportion of managed money long positions in total open interest for CME copper futures has not yet reached an extreme level. To push copper prices up to $14,000 per ton, this proportion would need to rise from 24% at the end of December to around 30%. While this is not Goldman Sachs' base case forecast, it illustrates the potential peak scenario driven by speculative frenzy.

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The above fascinating content is from the Zhuifeng Trading Desk.

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