Copper Is Struggling. European Defense Spending Could Help.

Prices for U.S.-based Comex copper surged more than 25% in the first half of the year. (Andre J Ivanov / AFP / Getty)

Demand for copper has been soft, but European military spending could provide a boost.

Copper prices have been on a roller coaster this year, thanks in large part to uncertainty around the Trump administration’s trade policies. Prices for U.S.-based Comex copper surged more than 25% in the first half of the year, as President Donald Trump’s threatened tariffs prompted traders to stockpile the metal in the U.S.

When the actual policy was unveiled last month, the levies on imported copper weren’t as broad as many feared, and the imperative to build up stateside copper inventories all but vanished. On July 30, copper fell 20%, its worst single-day decline on record, and hasn’t recovered.

On Thursday, the most active Comex copper contract settled at $4.44 a pound, up 0.1%. That’s up about 10% from the start of the year, but 24% below the all-time high it hit in late July, just before Trump’s tariff announcement.

In the short term, copper may have further to fall, as the market slowly works through the hoard that U.S. traders imported during the first months of the year.

“The excess inventory equals over seven months of typical U.S. import demand,” wrote Citi commodities researcher Tom Mulqueen in a note last week. “Excess inventory draw could take place over many months.”

Citi forecasts that copper traded on the London Metal Exchange, currently trading at $9,721 per metric ton, will fall about 5% to $9,200 over the next three months.

In the longer term, however, copper prices will reflect demand, which is closely tied to economic growth. One source of such growth that investors might be overlooking, is European defense spending, according to a note Thursday by Goldman Sachs.

In addition to calling for tariffs, Trump has been urging European powers to increase their military budgets. Driven by concern over the war in Ukraine, those nations seem poised to just that, increasing military spending to an estimated 2.7% of gross domestic product by 2027 from 1.9% last year, according to Goldman’s forecasts.

Goldman expects that about 40% of this spending will go to “metals-intensive equipment procurement,” wrote the commodities research team led by Daan Struyven. While that’s higher than the typical average of 20% for NATO countries, it’s in line with the trend since 2022, the analysts argued, and enough to essentially triple European defense spending on industrial metals.

As a result, the analysts estimate the growth in global copper demand is likely to increase to 2.4% from 2% between 2025 and 2027—creating a big long-term tailwind.

The impact on copper prices? Goldman didn’t offer a specific number, but said the dynamic “provided upside risk” to its 2026/2027 forecast for copper to trade at $10,000 to $10,750 a metric ton.

Write to Ian Salisbury at ian.salisbury@barrons.com