We say pretty regularly that if you want to figure out which way the global economy is headed, you should take a look at the price of copper. Because copper is used in so many things — power lines, appliances, vehicles, wind turbines, EV batteries. You get the picture. There is so much demand for the metal right now, the price of copper futures is at its highest since the middle of 2022.

A commodity price generally goes up because there’s more demand than supply. And right now, there are signs that demand for copper is rising.

“China’s looking better, the U.S. is going gangbusters,” said Ian Lange, director of the Mineral and Energy Economics program at the Colorado School of Mines. 

Improving economic conditions in the two largest economies in the world are likely driving copper demand. But so is a longer-term trend, he says: the energy transition.

“To the extent that we are putting on more solar farms, more wind farms, more batteries, again copper is needed for all of those, you gotta connect it to the grid,” he said.

Plus, EVs need a lot more copper than traditional cars and all of those new data centers need the metal too.  

But Chris Berry, president of House Mountain Partners, doesn’t think those growth areas tell the whole story of copper prices right now.

“I think it has a lot more to do with impediments on the supply side,” said Berry.

One example: a court in Panama ruled a contract the government signed with a copper mine’s Canadian owner was unconstitutional. The mine has been closed ever since. 

And Berry says other countries are getting more involved in copper mining operations.

“Foreign governments are saying, ‘Wait a minute, why would we allow foreign companies to come into our country, build these mines, basically extract the value and ship it offshore to create higher value products?'” he said.

More government intervention could slow down mining or expansion plans, he says. And higher interest rates have already slowed down investments in mining.

That could change if copper prices keep rising, but higher commodity prices could eventually show up in the price of other goods, says Bob Iaccino, chief market strategist at Path Trading Partners.

“So this is not a welcome turn of events for central banks, okay, to see the sort of commodities rally that we’ve seen,” said Iaccino.

Because if those commodities — including copper — push up inflation, their jobs get a lot harder.