The Base-Metals "Super-Squeeze": Copper Tops US$14,000/t, Aluminium at 4-Year High

TL;DR

• Copper closed at US$14,040.50/t on the LME (+1.5% on the day, +10% YTD) — through the psychological US$14k handle for the first time.
• Aluminium closed at US$3,752.50/t (+1.0%, +25% YTD) — a four-year high, with the cash–3M spread in its steepest backwardation since 2007.
• Goldman Sachs lifted its year-end copper target ~10% to US$13,735/t and cut global mine supply by 350kt; ex-US deficit revised tenfold to 640kt.
• Citigroup is more bullish still: US$14,500/t this month, US$15,000/t within 12 months, and calls aluminium's setup the "most bullish in at least half a century."
• HSBC labels the move a commodities "super-squeeze" while the Strait of Hormuz remains closed.
• Four converging drivers: Hormuz/Iran disruption • Grasberg & Kamoa-Kakula mine outages • US copper-tariff arbitrage ahead of a Trump Section 232 decision • structural AI-data-centre, electrification and energy-transition demand.

1. What happened

The London Metal Exchange opened June with a coordinated rally across the base-metals complex that pushed two of the most strategically important industrial metals to multi-year extremes:

Copper now sits roughly US$500 short of the January 2026 record, and is outperforming gold year-to-date — a notable reversal given gold has been the dominant macro hedge throughout the Iran conflict. Aluminium's 25%+ YTD gain is the metal's strongest run in over a decade.

The deeper signal is in the curve structure. LME cash aluminium briefly traded at a +US$116.50/t premium to three-month futures — the steepest backwardation since 2007. That is the market screaming physical tightness in real time: someone, somewhere, needs metal now and is willing to pay an extreme premium over forward delivery to secure it.

2. The four drivers behind the move

2.1 The Strait of Hormuz "super-squeeze"

HSBC analysts coined the phrase of the week, warning clients that commodities are entering a "super-squeeze" while the Strait of Hormuz remains blocked as a consequence of the unresolved US–Iran conflict.

The Middle East accounted for roughly 10% of global aluminium output before the war. Smelters in the region have been directly targeted in the strikes, and sulphuric-acid flows — a critical input for copper leaching operations globally — have been disrupted. WoodMac flagged last week that 3.0–3.5 million tonnes of aluminium output is at risk as the conflict drags on.

President Trump remains publicly optimistic about an interim peace deal, but Iran has threatened to suspend talks in response to Israel's escalating operations in Lebanon. Markets are no longer pricing a quick resolution.

2.2 Mine supply shocks at Grasberg and Kamoa-Kakula

Goldman cut its global mine supply forecast by 350,000 tonnes — a material revision — citing continued disruption at:

• Grasberg (Indonesia) — Freeport-McMoRan's flagship and one of the world's largest copper-gold mines
• Kamoa-Kakula (DRC) — Ivanhoe/Zijin's high-grade complex, the fastest-ramping major project of the past decade

Goldman now expects neither operation to return to full capacity until 2028. The bank lifted its forecast ex-US copper market deficit more than tenfold to 640,000 tonnes (from 60,000 previously) — an enormous structural revision that effectively re-rates the entire forward price curve.

2.3 The US copper-tariff arbitrage

Traders are positioning ahead of an imminent Trump administration decision on tariffs for refined copper imports. The mere prospect has opened an import arbitrage into the US, dragging metal out of LME-monitored warehouses and tightening ex-US balances further.

Goldman: "US imports beat expectations in H1 2026, and we expect US imports to reaccelerate over the coming month, reflecting the now-open import arbitrage."

Citi: "Lingering fears of US tariffs on refined copper may support sentiment."

The bifurcation is showing up cleanly in the Comex–LME spread, with Comex copper at US$6.68/lb outpacing LME on a percentage basis.

2.4 Structural demand — AI data-centres and the energy transition

Underlying the cyclical squeeze is a multi-year structural call that has now become consensus across the sell side:

• Data-centres alone are projected to require ~500,000 tonnes of copper per year by 2030 (Frank Giustra estimate, repeated by multiple bank analysts)
• Grid expansion, EV penetration, and renewables build-out continue to compound the demand call
• Tin (used in soldering) traded near a record on the same theme

Citi's note explicitly tied the bullish view to "resilient demand from AI and the energy transition" — the same thesis driving the Alphabet capital raise and the broader hyperscaler capex cycle covered in our AI-themed brief yesterday.

3. The Goldman and Citi calls — side by side

HSBC overlays both with the macro "super-squeeze" framing. All three banks are now structurally long base metals, a meaningful shift from the more cautious tone of Q1.

A more aggressive outlier — Traxys — has called US$15,000/t for copper as the base case, citing the same supply gap thesis.

4. Market microstructure — what the curve is telling us

Three signals worth flagging for treasury, procurement and portfolio teams:

1. Aluminium backwardation at 18-year extremes. The cash–3M premium briefly hit US$116.50/t on Tuesday — last seen during the 2007 commodities super-cycle. Physical buyers should expect prompt-month premiums to persist until either Hormuz reopens or a substitution wave kicks in.
2. LME aluminium inventories at lowest cover of the six main metals. This is a regime change for a market historically defined by oversupply.
3. LME–Shanghai aluminium arbitrage at its widest since March 2022, raising the prospect of record Chinese aluminium exports in the coming months (rods exempt from rebate tightening; alloy wheels in heavy demand) — a partial release valve, but one that may also pull Chinese domestic balances tighter.

5. What to watch next

• Trump administration ruling on refined-copper tariffs — expected within weeks; the single largest catalyst for the LME–Comex spread
• Hormuz status and Iran negotiation cadence — daily news flow remains a live risk
• Chinese aluminium export data — a record print would partially relieve the global squeeze
• Q2 production guidance from Freeport-McMoRan and Ivanhoe Mines — Goldman's 2028 normalisation timeline will be tested
• ECB 11 June meeting — a hawkish hike strengthens the EUR/weakens USD, modestly supportive of further USD-denominated commodity gains

Sources

1. Bloomberg / Mining.com — "Copper and aluminum power higher on global demand, war outlook" (2 Jun 2026)
2. Mining.com — "Copper price: Goldman, Citi make bullish calls on supply woes" (2 Jun 2026)
3. Mining.com — "Aluminum squeeze deepens as spreads tighten and inventories drop" (29 May 2026)
4. Mining.com — "Aluminum price hits four-year high on renewed Middle East supply risks" (1 Jun 2026)
5. Mining.com — "Global aluminum rally could draw record exports from China" (27 May 2026)
6. The Northern Miner — "Copper prices must rise as supply crunch looms: Giustra" (29 May 2026)
7. WoodMac — "Iran war squeezes acid, aluminum, miners' margins" (cited in Mining.com, 27 May 2026)
8. HSBC Holdings Plc — analyst note on commodities "super-squeeze" (cited in Bloomberg, 2 Jun 2026)
9. Goldman Sachs Commodities Research — copper target revision note (week of 1 Jun 2026)
10. Citigroup Commodities Research — aluminium and copper outlook notes (May/June 2026)