The global copper market has entered a state of profound disequilibrium as of February 2026, characterized by what analysts are calling the "Inventory Paradox." Despite the relentless long-term demand projections fueled by the artificial intelligence (AI) data center boom and the global energy transition, copper prices have retreated from their January record highs. On the London Metal Exchange (LME), copper is currently trading between $12,600 and $12,800 per tonne, a notable pullback from the mid-$14,000 levels seen just weeks ago.

This price softening comes at a time when visible exchange stockpiles have reached a staggering 23-year high. Combined inventories across the LME, the Shanghai Futures Exchange (SHFE), and COMEX have surged past 1 million tonnes, a level not seen since the early 2000s. The immediate implication for the market is a "two-speed" reality: a physical market currently flush with refined metal, clashing against a financial market that remains terrified of a long-term structural deficit.

The 1.1 Million Tonne Overhang

The road to this record-breaking inventory build-up began in late 2025. Throughout the final quarter of the year, a wave of "tariff front-loading" hit the United States, as domestic buyers aggressively imported refined copper to get ahead of anticipated trade policy shifts and new 15% tariffs under Section 232. This created a massive accumulation at COMEX (NYSE: CME) warehouses. Simultaneously, a slowdown in spot premiums in China led to 11 consecutive days of significant inflows into LME warehouses in early 2026, as metal originally destined for Asian ports was diverted to Western exchanges.

This surge in supply has effectively deflated the "tightness premium" that drove copper to record highs in January 2026. Michael Ball, a macro strategist at Bloomberg, notes that the market has transitioned from a state of backwardation—where immediate delivery is more expensive than future delivery—to a more neutral structure. According to Ball, "The rapid rebuild of exchange stocks has thinned the physical bid, suggesting that the extreme scarcity we feared at the start of the year was perhaps a year too early." The sudden abundance has forced speculative traders to unwind long positions, leading to the current price consolidation.

Winners and Losers in a Two-Speed Market

The primary beneficiaries of this temporary price reprieve are the hyperscale data center operators and electric vehicle (EV) manufacturers. Companies like Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOGL) are currently in the midst of massive infrastructure build-outs, with AI data centers requiring between 30 and 47 tonnes of copper per megawatt (MW) for advanced liquid cooling and power distribution. The $2,000-per-tonne drop from January’s peak represents a significant capital expenditure saving for these tech giants as they scale their AI footprints.

On the other side of the ledger, major mining outfits are facing a complex environment. Freeport-McMoRan (NYSE: FCX) and Southern Copper Corporation (NYSE: SCCO) have seen their stock prices experience volatility alongside the metal. While their long-term margins remain healthy due to prices still being historically high, the "inventory overhang" has dampened the explosive equity gains seen in 2025. Ivanhoe Mines (TSX: IVN), which has been a market darling due to its high-grade Kamoa-Kakula project in the DRC, remains resilient, but mid-cap players like Lundin Mining (TSX: LUN) are finding the current price ceiling more challenging as operational costs for new projects continue to climb.

AI Infrastructure vs. Macro Headwinds

The wider significance of this paradox lies in the unprecedented demand profile of the 2020s. Unlike previous copper cycles driven primarily by Chinese urbanization, the 2026 market is being held up by "inelastic" demand from the AI sector. J.P. Morgan analysts project that AI data centers could account for as much as 475,000 tonnes of copper demand this year alone. This "new economy" demand is clashing with traditional "old economy" signals, such as the massive exchange stocks that historically signaled a recession.

This event mirrors the early 2000s when the market misread the scale of the Chinese industrial revolution, though the roles are now reversed. In 2026, the market is grappling with a strategic reserve build-up in the West that looks like an oversupply but may actually be a "just-in-case" buffer for the anticipated deficit of 10 million tonnes projected by 2040. The current stockpile is essentially a temporary dam holding back a flood of demand that is still accelerating.

The Road Ahead: Trade for Tomorrow

In the short term, the market expects copper to trade sideways as it digests the 1-million-tonne inventory. However, the long-term outlook remains arguably more bullish than ever. Rob Bruggeman of 'The Wealthy Miner' describes the current situation as the "trade for tomorrow." He argues that the inventory build is a mere "timing signal" and that the underlying supply issues—declining ore grades in Chile and the 17-year lead time for new mines—have not been resolved. "The surplus we see today is refined metal sitting in a warehouse; it is not new production from the ground," Bruggeman says.

Investors should watch for a "drain-down" phase starting in late 2026. As the front-loaded tariffs are processed and the next generation of AI chips—which require even more intensive cooling—hit the market, these record stockpiles could vanish as quickly as they appeared. The strategic pivot for major miners like BHP Group (NYSE: BHP) and Rio Tinto (NYSE: RIO) will likely involve doubling down on copper-heavy acquisitions, as the "inventory paradox" may represent the last opportunity to secure assets before the next structural leg up.

Final Assessment: A Masked Deficit

The "Inventory Paradox" of February 2026 is a masterclass in market psychology. While 1.1 million tonnes of copper on exchange shelves suggests a glut, the underlying reality is a market that is merely catching its breath. The pullback to the $12,600-$12,800 range provides a more sustainable foundation for the market than the parabolic run seen in January.

For the public and investors, the key takeaway is that the "tightness" hasn't disappeared—it has simply been deferred. As the global energy transition and AI build-out continue to consume physical metal at record rates, the record high inventories of 2026 may soon be remembered as a missed buying opportunity. In the coming months, the most critical data point to track will be the rate of inventory withdrawal from COMEX and LME warehouses, which will signal when the "tomorrow" Bruggeman speaks of has finally arrived.

This content is intended for informational purposes only and is not financial advice.