Iran's two major copper smelters suspected to have halted production, adding uncertainty to Middle Eastern supply

Amid the continued escalation of tensions in the Middle East, the global copper market is being hit by a pincer move of both a supply shock and concerns about demand.

On Tuesday, the 7th in U.S. Eastern Time, media outlets cited data from the satellite data provider Earth-i, saying that Iran’s two major copper smelters have seemingly suspended operations one after another in recent times. The institution monitors multidimensional data—such as heat signals, waste-gas emissions, inventory changes, and vehicle activity—showing that the industrial activity of the smelters in question has clearly fallen to a low level.

Among them, Sar Chesmeh, Iran’s largest copper smelter, has been shut down since the day before last Saturday, March 28. Another state-owned smelter, Khatoon Abad, also stopped production over the weekend.

Combined, these two smelters have annual production capacity of more than 370k tons, serving as a core pillar of Iran’s copper processing system. Sar Chesmeh’s annual capacity exceeds 250k tons, while Khatoon Abad’s annual copper output is about 120k tons. Together, they not only determine Iran’s refined copper supply capacity, but also play an important complementary role in regional trade.

What the satellite data reflects is a typical feature of “systemic shutdowns”: the disappearance of continuous heat sources, a decline in emissions, and stagnation of transportation activity. This usually means the production chain is facing an external shock, rather than short-term equipment maintenance.

In recent times, various industrial assets—including steel plants and oil and gas facilities—have been frequently affected by conflicts, indicating that geopolitical risk has expanded from the energy sector to a broader industrial ecosystem. The suspected halt of Iran’s two major copper refineries marks that the impact of the Middle East geopolitical conflict on the metal supply chain is deepening further.

Given the recent situation, unstable power supply, transportation disruptions, and rising security risks could all become direct triggers for smelter shutdowns. Copper smelting is a high-energy, continuous production process; once interrupted, the recovery cycle is long and the costs are high. As a result, supply impacts often have a lagging amplification effect.

Market analysts believe that compared with oil and gas facilities, the metal smelting industry is more dependent on a stable operating environment. Once grid, logistics, or security conditions deteriorate, companies are often forced to “shut down first.” This makes supply-side shocks more sudden and less predictable.

As an important resource-processing hub in the Middle East, if Iran’s industrial system is disrupted, it will further disrupt the regional flow paths of bulk commodities.

Goldman Sachs: Energy shocks may weigh on demand; copper prices face downside risks

In contrast to supply disruptions, the demand side is facing macroeconomic pressure.

According to Goldman Sachs’ latest report, against the backdrop of soaring oil and gas prices, global economic growth faces downside risks, which in turn weakens demand for industrial metals. The report notes that if transport through the Strait of Hormuz remains obstructed and energy prices stay elevated, it will drag down the global economy and suppress copper demand, with near-term risks skewed to the downside.

Goldman Sachs believes that current copper prices are not sufficiently supported by fundamentals; if macro expectations worsen or market de-risking sentiment intensifies, prices could weaken further.

Goldman Sachs’ base-case forecast is that shipping through the Strait of Hormuz will resume from mid-April. However, its analysts point out that current copper prices are already far higher than their estimated fair value of about $11.1k per ton.

Data show that since February 28, when the U.S. and Israel launched a military strike against Iran, copper prices have fallen cumulatively by more than 7%, reflecting rising concerns in the market about the demand outlook.

At the same time, Goldman Sachs has slightly lowered its average copper price expectation for this year, believing that under a “seriously unfavorable scenario,” the price-supporting effect of strategic stockpiling and a tight balance pattern may weaken.

Commentary suggests that the current copper market is showing a typical tug-of-war between supply-positive factors versus demand-negative factors. On the one hand, the shutdown of Iranian smelters and rising geopolitical risks inject an uncertainty premium into the market’s supply. On the other hand, soaring energy prices curb economic activity, causing demand expectations to weaken and putting downward pressure on prices.

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