Base metals gain amid AI demand, supply concerns in July

Strong demand from the artificial intelligence (AI) sector, a weakening US dollar, supply concerns, and the US Federal Reserve's waning likelihood of raising interest rates in the near future drove base metal prices higher last month.

Copper jumped 4.7% per pound amid concerns that current and planned mining projects may not be enough to meet rising demand, while South Korea-Chile cooperation on critical minerals supported demand.

Seoul and Santiago signed five agreements on lithium and copper, expanding their cooperation on critical minerals to include full value chain partnerships, information exchange, and technological cooperation.

Concerns over mining supply in Chile and low processing fees signaled tightness on the supply side as global copper stocks continued to decline, while strong Chinese demand contributed to upward price pressure.

Mounting production challenges amid unfavorable weather conditions and operational disruptions further strained copper supply.

Washington is expected to impose tariffs on copper imports, further fueling supply concerns and driving up prices.

Meanwhile, aluminum rose 2.5% per pound amid tensions in the Middle East and low inventory levels, while China's rising aluminum exports highlighted strong global demand.

Aluminum and copper prices rose between January 2025 and April 2026 amid supply constraints, while copper tested record highs, according to a recent outlook report by the International Energy Agency (IEA).

Declining London Metal Exchange and Shanghai Futures Exchange aluminum inventories continued to fuel supply concerns, while the ongoing Middle East conflict reportedly made sourcing aluminum cans more difficult, affecting the operations of companies such as Coca-Cola.

Indonesian aluminum shipments were disrupted by the country's new controls on rare earth elements (REEs), uranium, and tin, further exacerbating supply concerns.

At the same time, nickel rose 5.2% per pound as the US reportedly plans to impose a 12.5% tariff on imports from 60 countries, fueling concerns over trading costs for the metal.

Zinc prices increased 2.5% per pound as low inventories and supply risks came to the fore.

Zafer Ergezen, a futures and commodity markets expert, told Anadolu that demand from the defense and AI industries played key roles in the rise of base metal prices in July.

“AI is the sector contributing most to global growth, as it is the one attracting the most investment and, consequently, experiencing the strongest growth,” he said. “Demand for base metals in particular is rising significantly due to the growth of the AI sector.”

Ergezen said that despite recent selling pressure on AI stocks, which raised questions about the sustainability of massive AI investments and the profitability of AI companies, demand and growth in the sector remained strong.

“This growth is expected to continue in the coming period, and we will see the upward trend in certain base metals remain strong, or at least more resilient to declines,” he added.