Copper prices have stabilized around $14,000 a ton after a recent decline, following a period where prices reached record highs. The pullback comes as new deliveries of stockpiles to exchange-tracked warehouses indicate a potential easing of the supply squeeze that had driven prices up. Last week, prices had rallied significantly due to traders diverting supplies to the US in anticipation of tariffs on refined metal, which left other regions undersupplied.
Despite the recent easing of immediate supply pressures, the long-term outlook for copper remains characterized by tight supply and increasing demand. Global mine copper production is projected to see its first decline in nearly a decade this year, according to Sprott Asset Management. This is attributed to production disruptions, falling ore grades, and weak output in Chile. Production disruptions at major mines, such as Freeport-McMoRan's Grasberg and Ivanhoe Mines' Kamoa-Kakula, are expected to reduce 2026 production by approximately 600,000 metric tons, representing about 2.5% of annual global mine copper output.
Demand for copper is being driven by various factors, including the expansion of power grids, the growth of AI data centers, and national defense initiatives. The US tariff policies have also contributed to significant volumes of copper cathode being directed into US warehouses. Although higher prices can improve project economics, the development cycle for new copper mines is extensive, averaging about 17.5 years from discovery to production, making quick supply responses challenging.
In the short term, LME copper settled at $14,563 per metric ton last Friday, up 0.62%, with increased trading volume and open interest from bulls. SHFE copper 2610 contract closed at 109,900 yuan per metric ton, up 0.34%. Spot premiums in Shanghai are expected to remain high due to tight supply, upcoming smelter maintenance periods, and port congestion. Demand remains largely need-based, with limited acceptance of high premiums, despite an improvement in purchasing sentiment.
Overall, while recent deliveries have offered some near-term relief, the fundamental picture suggests continued tightness in the copper market. The combination of declining mine production, slow supply response to price signals, and growing demand from various sectors is expected to maintain upward pressure on prices, even as traders periodically shrug off hawkish signals from central banks regarding interest rates.
