Metals are uniquely positioned to perform across multiple economic regimes. They serve as a hedge against national debt and central bank irresponsibility, benefit from potential rate cuts and sticky inflation, and face a massive supply-demand shock from the AI and energy infrastructure build-out.

An acute supply squeeze in copper is imminent as massive U.S. imports create a severe inventory dislocation. With LME stocks dwindling to critical levels, J.P. Morgan predicts prices must spike to reverse the arbitrage and incentivize the flow of metal out of the U.S. to where it's more needed.

Contrary to narratives about excess demand, the recent inflationary period was primarily driven by supply-side shocks from COVID-related disruptions. Evidence, such as the New York Fed's supply disruption index accurately predicting inflation's trajectory, supports this view over a purely demand-driven explanation.

While headlines focus on advanced chips, China’s real leverage comes from its strategic control over less glamorous but essential upstream inputs like rare earths and magnets. It has even banned the export of magnet-making technology, creating critical, hard-to-solve bottlenecks for Western manufacturing.

High U.S. copper inventories (COMEX) are unavailable to the global market due to a persistent price premium over the LME. This regional inventory isolation means global supplies are much tighter than headline figures suggest, as the U.S. stockpile isn't alleviating scarcity elsewhere.

The Grasberg mine disruption provides a fundamental catalyst for higher copper prices. This is amplified by a macro environment where investors are rotating into real assets like copper due to inflation risks and economic uncertainty, creating a potent combination for a price surge.

The perceived global copper deficit is misleading. Sufficient inventory exists, but it's concentrated in the U.S. due to tariff-related import front-loading. The bull case for copper hinges on London Metal Exchange prices rising enough to incentivize the costly re-export of this 'trapped' copper to Asia.

For 50 years, commodity prices moved together, driven by synchronized global demand. J.P. Morgan identifies a breakdown of this trend since 2024, dubbing it the 'crocodile cycle,' where supply-side factors cause metals to outperform while energy underperforms, creating a widening gap like a crocodile's mouth.

The major outage at the Grasberg mine, which supplies 3% of the world's copper, is turning a previously balanced market into a significant deficit for 2025 and 2026. This highlights supply chain fragility, as there were no existing surpluses to absorb the shock.