Base metals rally on supply crunch, AI-infra demand; experts see selective upside ahead

Copper has emerged as the standout performer, supported by tightening supply conditions following disruptions at key South American mines and a surge in power demand from data centres.

• Copper, aluminum, and tin lead base metals rally due to supply and demand factors.
• Analysts warn of volatility and selective gains after recent sharp price rises.
• Copper seen as a standout performer due to supply strains and AI-driven demand

Did our AI summary help?

Base metals have rallied sharply over the past month, led by copper, aluminium and tin, as supply disruptions, AI-led infrastructure demand and supportive global macro cues pushed industrial metals higher. While analysts remain constructive on the medium-term outlook, they caution that the rally is entering a more volatile phase, with gains likely to be selective rather than broad-based.

Over the past one month, aluminium prices rose 6.53 percent to $3,135.25 per tonne, while zinc and lead gained 4.48 percent and 4.30 percent respectively. Copper prices were last seen near $5.87 per lb, with daily gains of 0.70 percent, according to January 19 data.

Copper has emerged as the standout performer, supported by tightening supply conditions following disruptions at key South American mines and a surge in power demand from data centres. “The recent rally in base metals, particularly copper, is driven by a confluence of factors such as the power surge from AI data centres, structural supply strains in South America and speculative buying ahead of potential US import tariffs,” said Aamir Makda, Commodity & Currency Analyst at Choice Broking.

Makda said easing global financial conditions have amplified the move. “Fed rate cut expectations and China’s stimulus measures have provided an add-on boost, while institutional investors have been rotating from bullion into industrial metals, portraying copper as a more attractive asset,” he said.

Aluminium prices have also remained firm as China continues to enforce its 45-million-tonne production cap, despite output rising 2.4 percent in 2025 to a record 45.02 million tonnes. Tin, meanwhile, is facing supply constraints due to disruptions in Myanmar and Indonesia, keeping the market structurally tight.

According to Maneesh Sharma, AVP – Commodities & Currencies at Anand Rathi Share and Stock Brokers, the rally has been impacted by both supply-side pressures and improving macro sentiment. “Copper mine disruptions, China’s aluminium capacity caps and low global inventories have supported prices, while a weaker US dollar and expectations of interest rate cuts have added momentum,” Sharma said. He added that strong Chinese exports, reflected in a record $1.2 trillion trade surplus in 2025, have helped sustain industrial activity.

However, analysts noted that demand-side risks remain. “China’s weak property sector and slower infrastructure spending could limit the upside,” Sharma said, adding that copper continues to offer the most attractive risk-reward due to electrification-led demand and refined market tightness.

The dark horse

Elara Securities has also turned constructive on industrial metals, calling copper one of the “dark horses” for 2026 as leadership in global asset classes begins to shift. In a recent strategy note, Elara said investor focus is gradually moving towards assets linked to power, grid infrastructure and data centres, where copper demand remains structurally strong.

From an equity perspective, rising metal prices are also improving the outlook for metal producers and mining stocks. In a recent note, HSBC said that companies with high operating leverage to base metal prices stand to benefit disproportionately if current price levels sustain, particularly those with strong balance sheets and cost discipline. The brokerage highlighted that earnings visibility for select non-ferrous metal producers has improved alongside tighter supply conditions and firm global demand.

“Investing in base metals such as copper and aluminium offers diversification to portfolio with growth potential tied to global industrial demand. However this can be achieved through stocks of mining companies and global ETF based out of US (e.g. Invesco DB Base Metals ETF). In India however Investors can gain exposure through stocks, or directly through futures/options contracts on exchanges like MCX. Key metals like copper act as economic health indicators, making base metals essential for diversified portfolio,” Sharma said. The Nifty Metal index is up 36 percent in last 1year, and in last one month it is up 11 percent and YTD it is up 3.8 percent

What is next?

Market participants expect further upside but warned that price swings could intensify after the sharp rally. Makda expects copper to test the $12,500–13,500 per tonne range by Q2 2026, though he cautioned that “short-term exhaustion after the recent surge could lead to corrections.” Aluminium and tin, he said, remain buy-on-dips candidates given persistent supply constraints.

Bhavik Patel of Tradebull Securities noted that markets are entering a commodity super-cycle. “This cycle started with precious metals and is now turning towards base metals. Copper still has a lot of potential for upside and could become the next silver,” Patel said. He added that “the best way to play commodities currently is to wait for any correction before making fresh positions, whether in gold, silver or base metals.”

Experts note that the biggest risk to the rally remains a global economic slowdown. “Any sharp cooling in AI infrastructure spending could trigger a 10–15 percent correction in base metals like copper,” Makda cautioned.

Base metals vs gold and silver

Analysts recommend balance rather than outright rotation. “Gold remains portfolio insurance during uncertainty, while silver offers a hybrid play, industrial usage along with safe-haven appeal,” Makda said, adding that investors seeking stability should stick with gold, while those willing to take higher risk to benefit from the energy transition may consider base metals and silver.