At first glance, a prolonged blockade of the Strait of Hormuz would seem to be bad news for copper. The reasoning seems almost automatic: an oil shock, an economic slowdown, a collapse in industrial demand, and a fall in cyclical metals. For decades, copper has been seen as one of the best barometers of global growth. When economic activity slows down, copper prices usually fall sharply.
This initial interpretation is not unreasonable. Oil remains the key ‘meta-input’ in the global economy. It is a direct or indirect component of virtually all production, transport and logistics costs. A sharp rise in energy prices therefore acts as a global tax on the world economy: industrial margins are squeezed, logistics costs rise and growth forecasts deteriorate. Historically, markets have often reacted reflexively to this type of shock: selling of cyclical assets, a fall in industrial metals and a flight to defensive stocks. Copper is therefore one of the first casualties of this trend.
But this interpretation is now incomplete.
A return to the fundamentals of copper
Now that the initial phase of macroeconomic panic has passed, investors are gradually rediscovering the unique characteristics of each commodity. And in the case of copper, the blockade of the Strait of Hormuz raises a much more complex issue than simply a scenario of collapsing demand.
The first factor concerns the very structure of global supply. Producing copper does not merely require energy; it also requires access to a whole range of chemical and industrial inputs, the markets for which are now extremely concentrated.
The case of sulphuric acid is particularly telling. This product, largely overlooked outside specialist circles, is nevertheless essential to leaching processes (which account for around 20% of global production) used in many copper mines, particularly in Chile, the world’s leading producer with nearly 25% of global output. However, China, faced with its own industrial and energy constraints, has recently reduced certain exports of sulphur and chemical products in order to protect its domestic market. Furthermore, sulphur is also widely used in the production of fertilisers, meaning that Chile is now competing with countries such as India, which are prepared to pay a premium to secure sulphur supplies.
Against a backdrop of global energy tensions and logistical disruptions, this dependence takes on a strategic dimension. If there were to be a shortage of sulphuric acid or if its price were to rise sharply, part of global copper production could become more costly, or even temporarily curtailed. The paradox then becomes clear: the very same energy shock that is expected to weigh on copper prices could simultaneously undermine its supply.
A metal that has become strategic
And this contradiction is all the more significant given that copper is no longer just another industrial metal. The energy transition, the electrification of economies, electricity grids, the defence industry, data centres and electric vehicles all rely on massive consumption of copper. Unlike other raw materials, its substitutability remains limited in many strategic applications.
In other words, part of global demand may prove to be largely unaffected by rising prices. Above all, in a market that has already been structurally tight for several years, certain producers now have greater pricing power than was seen in previous industrial cycles. When global supply is constrained, increases in energy costs can be partially passed on to end consumers.
The copper market thus finds itself caught between two opposing forces: on the one hand, fears of a global slowdown and a collapse in demand triggered by the oil shock; on the other, physical, chemical and logistical constraints that are putting further strain on an already stretched supply chain.
A metal that has become a double-edged sword
It is precisely this duality that explains why copper’s response to energy crises is becoming increasingly ambiguous. The red metal is no longer merely an indicator of global growth; it is also revealing the industrial vulnerabilities of the energy transition and the data centre industry.
And perhaps this is where the real paradigm shift lies: in a world where energy, critical metals and geopolitics are now deeply intertwined, an oil shock no longer necessarily leads to a sustained decline in industrial metals. It may also accelerate their scarcity.
