Copper just staged its strongest rally since last summer, pushing benchmark futures on the London Metal Exchange above $11,700 a ton. The move has Wall Street's biggest banks picking sides in what's shaping up to be one of the year's most contentious commodity calls.

The rally stems from a cocktail of concerns: investors are positioning for possible universal copper tariffs that could kick in around 2027, supply is looking tighter, and inventories are in weird places. Traders have been rushing shipments into the U.S. to capture higher domestic prices and dodge future import duties, which has left the London market more vulnerable to swings in financing flows and inventory shifts. The result? Amplified volatility.

The Bull Case: Citi and JPMorgan Go Big

Citigroup is leading the charge on the bullish side, pointing to a structural deficit driven by the gap between sluggish new supply and surging demand from grid upgrades, defense spending, and the broader energy transition. The bank is calling for $13,000 a ton by the second quarter of 2026, assuming tariffs move forward and macro conditions stay favorable.

"We have conviction in copper upside through 2026 supported by multiple bullish catalysts, including an incrementally constructive fundamental and macro backdrop," analysts led by Max Layton told Bloomberg.

JPMorgan is singing a similar tune. The bank projects a refined copper deficit of about 330,000 tons in 2026 and sees prices hitting roughly $12,500 per ton in Q2 of that year, with a full-year average just north of $12,000.

The Bear Case: Goldman Pumps the Brakes

Not everyone is buying the hype. Goldman Sachs has emerged as the prominent skeptic, arguing that prices have run ahead of what the actual supply-demand picture justifies. The bank believes there's enough metal around to meet demand without the kind of squeeze bulls are pricing in.

"Most of the recent copper price increase is based on expectation of future market tightness, rather than current fundamentals," commodity analyst Aurelia Waltham wrote in a note. "We do not expect the current breakout above $11 000 to be sustained."

Mercuria Makes a Power Move

While the banks debate, trading house Mercuria is making waves with action rather than words. The firm has ordered about $500 million worth of copper for withdrawal from LME warehouses, one of the largest inventory drawdowns in more than a decade. That move is tightening available exchange stocks in a meaningful way.

Here's where things get interesting: headline inventory numbers are rising while deliverable metal outside the U.S. is shrinking. That contradiction has become a defining characteristic of this market cycle.

"This is the big one. If the world keeps going like this, we will be left without copper cathodes in the rest of the world," Kostas Bintas, Mercuria's Global Head of Metals & Minerals, told Bloomberg. He warned that buyers outside the U.S. could face critical shortages as early as the first quarter, though he stopped short of offering a specific price target.

"Just looking at the facts, mathematically… What is going to happen if all of this continues? There's only one answer: there will be tightness and a higher price," Bintas said.

Price Watch: United States Copper Index Fund ETV (CPER) is up 31.71% year-to-date.