Pry Capital Copper Market Note on Inventories, Arbitrage, and Policy Risk

Pry Capital’s starting point: copper is trading two stories at once 
Pry Capital describes the current copper tape as a collision between structural-demand 
optimism and short-cycle dislocations. 
On the optimism side, Reuters reported copper pushing above $13,000/ton in early January, 
with the rally tied to expectations of strong demand growth from AI data centers and 
electric vehicles, plus a broader “critical minerals / supply chain security” theme. On the 
dislocation side, Pry Capital points to how tariff risk and arbitrage have re-routed physical 
metal, creating inventory buildups that can confuse the signal coming from price. 
Price action matters—but the “why” matters more 
Pry Capital treats the early-January spike as a regime clue, not a standalone headline. 
Goldman Sachs notes LME copper rallied to a record $13,387/ton on Jan 6 after a strong 
run-up from late 2025, and expects support near $13,000 in Q1 before forecasting a decline 
later in the year. That arc—record high, then a “supported but vulnerable” profile—is 
consistent with a market where positioning and logistics can amplify moves beyond what 
near-term fundamentals justify. 
S&P Global adds an important nuance: analysts there argue the current price level can be 
difficult to defend if speculative positioning is stretched, noting LME net length near the 
upper end of historical ranges and warning momentum can flip quickly. Pry Capital’s 
interpretation is that copper is in a phase where tightness can be real and overshoot can 
still occur—both can be true in the same quarter. 
The physical reality check: where are the inventories? 
Pry Capital leans heavily on inventories because they reveal whether the market is tight 
everywhere, or tight only in certain deliverable locations. 
Reuters reported that copper pulled into COMEX warehouses rose sharply: COMEX stocks 
were 499,841 short tons (453,450 metric tons) as of Jan 2, up about 400% since April, 
as traders moved metal ahead of potential levies; one analyst estimated additional large 
volumes stored off-exchange in the U.S. 
This is the core “signal problem” Pry Capital flags: 
● When exchange inventories surge in one region due to policy risk, price can scream 
scarcity even as the global system temporarily behaves like a surplus. 
● In Reuters’ Jan 5 reporting, Macquarie’s Alice Fox argued the fundamentals did not 
justify current prices and suggested the inventory shift implied a sizable surplus the 
prior year. 
S&P Global’s reporting echoes this normalization risk, noting the arbitrage between COMEX 
and LME no longer supports additional pulls, and that the market has been focused on U.S. 
tariff timing and its inventory side-effects. 
Flow mechanics: tariff risk is reshaping trade lanes 
Pry Capital’s second pillar is flow data—because copper is global, but deliverability isn’t. 
Reuters reported that China, still the world’s largest copper importer, has faced difficulty 
competing with the U.S. premium for CME-deliverable brands; it also reported China’s 
imports of Chilean copper fell 43% year-on-year and Peruvian metal fell 50% over 
January–November 2025, with rising dependence on shipments from the DRC (37%) and 
Russia (11%) over that period. 
For Pry Capital, these figures support a specific conclusion: this market is not just “tight vs. 
loose”—it’s geographically segmented. Policy-driven premiums can drain metal from one 
hub and pile it into another, creating: 
● localized tightness (premiums spike; nearby spreads tighten), 
● while headline inventory builds elsewhere look “bearish.” 
That segmentation is why Pry Capital avoids single-number narratives (“copper is tight / 
copper is surplus”) and instead asks: tight where, deliverable into what, and at what cost? 
Supply: disruptions are reinforcing the scarcity 
narrative 
On the supply side, Pry Capital notes the market is being fed by repeated reminders that 
mine output isn’t a smooth line. 
Reuters’ Jan 5 report cited disruptions including the incident at Freeport-McMoRan’s 
Grasberg mine in Indonesia and a strike at Capstone Copper’s Mantoverde mine in Chile as 
reinforcing shortage concerns. Reuters also reported Citi estimates that implied a 
308,000-ton deficit (via refined copper production/market balance estimates) in that context. 
Separately, Reuters’ Jan 22 Freeport coverage highlights how price is offsetting operational 
hits: the miner benefited from a 28% rise in average copper price to $5.33/lb, even as the 
company cut its 2026 production outlook and detailed a phased restart trajectory at 
Grasberg. Pry Capital reads that as a reminder that “deficit talk” can persist even when some 
supply issues resolve—because the system is running with less slack. 
Demand: the AI story is real, but China price sensitivity 
is also real 
Pry Capital treats demand as a two-speed story. 
Speed 1: structurally supportive themes. Reuters explicitly ties the rally narrative to AI 
data centers and EVs—copper-intensive buildouts that are difficult to replace with other 
materials in the near term. 
Speed 2: cyclical and price-sensitive behavior—especially in China. S&P Global cites 
analysts arguing that downstream demand growth in China is not dramatic in 2026 and that 
high prices are already hurting end-user demand, pointing to a sharp decline in China’s 
import premium; it also cites a view that China’s core copper-using sectors may grow only 
modestly (near flat) this year. 
Pry Capital’s synthesis: copper can be structurally bullish over the decade and still be 
tactically unstable quarter-to-quarter if prices outrun near-term affordability, premiums 
collapse, or inventories reappear. 
Pry Capital’s framework: three dashboards to avoid one 
bad forecast 
Rather than projecting a single average price, Pry Capital organizes the copper market into 
three dashboards: 
1) The “Price vs. Placement” dashboard 
● Are record prices being driven by real global scarcity, or by where metal is parked 
due to tariff and arbitrage incentives? 
● Watch whether COMEX inventory builds persist once the policy/tariff timeline 
becomes clearer. 
2) The “Deficit math” dashboard 
● Reuters notes deficit estimates (e.g., Citi’s) that support tightness. 
● S&P Global notes other analyst views that deficits are not large enough to justify 
extreme prices and that positioning can overextend. 
The practical point: when credible analysts disagree, pricing is more likely to be position- 
and flow-driven than “settled by fundamentals” in the near term. 
3) The “China premium” dashboard 
● If China’s import premium stays weak while U.S. inventories remain heavy, Pry 
Capital expects the market to become more vulnerable to drawdowns even if the 
long-term narrative stays positive. 
What would change Pry Capital’s view quickly 
Pry Capital highlights three “fast switch” catalysts: 
1. Policy clarity on U.S. tariff timing and scope (because it changes the incentive to 
ship/warehouse copper). 
2. A sustained drawdown in U.S. inventories (which would suggest the build was 
truly transitory and demand is absorbing supply). 
3. Evidence that China’s physical demand is re-accelerating despite price 
(premiums, imports, and downstream orders—where price elasticity shows up first). 
Bottom line 
Pry Capital’s copper message is that the market is currently pricing a structural scarcity 
future while simultaneously living through a short-term logistics and policy distortion. 
Record prices can be “right” about the long-term race for supply and still be “fragile” in the 
near term if inventories and positioning are doing more work than end-user demand.