SunSirs: Multiple Factors Resonate: A Structural Bull Market in Copper Prices Is Expected

Since the fourth quarter of this year, global copper prices have continued to hit record highs. In early December, the main Shanghai copper contract price broke through 94,500 CNY per ton, while the LME copper price reached US$11,900 per ton. Year-to-date cumulative gains for both markets have exceeded 30%. This round of copper price increases is not driven by a single supply-demand imbalance but rather by the combined effect of multiple factors, including supply bottlenecks, the release of copper’s financial attributes, and policy disruptions. Although data from the International Copper Study Group indicate that the global refined copper market is expected to see a slight surplus of 178,000 tons in 2025, regional inventory imbalances and expectations of a long-term structural deficit are jointly pushing copper prices beyond the constraints of immediate fundamentals, highlighting that copper—as a strategic resource—is undergoing a revaluation amid the energy transition and evolving geopolitical landscape.

Mineral Supply Disruptions and Smelting Dilemmas Intertwine

Global copper supply is facing systemic pressure. In 2025, a series of incidents—including the El Teniente mine disaster in Chile, the Grasberg mudslide in Indonesia, and the earthquake at the Kamoa-Kakula mine in the Democratic Republic of the Congo—have led to a year-on-year decline of approximately 4.7% in global copper production. The annual supply gap is expected to widen to between 150,000 and 300,000 tons for the full year. Meanwhile, ore grades continue to decline (the average grade has fallen by as much as 30% since 1990), and the commissioning of new projects has been consistently delayed (with an estimated average annual growth rate of less than 2% over the next five years). These factors are further intensifying medium- and long-term supply pressures, fueling global market concerns about copper supply and significantly driving up its risk premium.

In the smelting sector, recently, global copper concentrate spot processing fees (TC/RC) have remained persistently at historically extremely low levels around -40 USD/ton. Chinese smelters, facing raw material shortages, are generally experiencing production losses, and downward pressure on output is steadily increasing. Overseas, companies such as Glencore and First Quantum are also reducing copper smelting capacity due to cost pressures, leading to a continued weakening of global refined copper supply elasticity.

Currently, disruptions in copper ore supply combined with losses and production cuts in the smelting sector are jointly driving contraction throughout the industrial chain. This has led to a significant slowdown in the growth rate of global copper supply. Meanwhile, apparent demand is rebounding. This contrast—slowing supply and rising demand—further highlights the vulnerability of the current copper supply chain and the structural imbalance between supply and demand.

Rising growth drivers and regional imbalances underpin copper prices

From the perspective of demand structure, traditional consumption sectors such as construction and home appliances have shown weak performance. However, the new energy and artificial intelligence industries have emerged as key growth drivers. Annual copper consumption for photovoltaic and wind power installations exceeds 1.8 million tons, and the amount of copper used per new-energy vehicle reaches 80 kilograms—about three times that of conventional vehicles. Moreover, investment in China’s power grid continues to grow steadily, the “dual-new” subsidy policies keep being strengthened, and new infrastructure projects are steadily advancing, all of which provide robust support for copper demand. It is projected that by 2025, the global refined copper consumption growth rate will remain between 2% and 4%, providing a resilient foundation for the copper market amid ongoing adjustments in the global industrial chain landscape.

As of early December, global copper inventories showed a clear regional divergence: COMEX inventories surged to 400,000 tons, an increase of 300% year-on-year; LME Asian warehouse inventories fell below 150,000 tons, and China’s social inventories can only meet about one week’s worth of consumer demand. This divergence is mainly driven by stockpiling behavior triggered by U.S. tariff policies and cross-market arbitrage activities. As a result, spot resources in non-U.S. regions have tightened significantly, pushing spot premiums to historic highs and boosting bullish sentiment in the global copper futures and related derivatives markets.

By 2026, the copper market is expected to remain in a tight balance. On the supply side, constrained by factors such as insufficient capital expenditure by mining companies, the release of new production capacity will be limited. According to forecasts by the International Copper Study Group, the global copper supply-demand gap could widen to 300,000 tons. On the demand side, the construction of AI computing centers and the global grid upgrade are projected to drive annual demand growth at a rate of 5% to 10%, which should help offset the contraction in consumption from traditional sectors. In an environment of low inventories, should supply-side disruptions—such as geopolitical conflicts or sudden policy changes—occur, a structural bull market in copper prices could materialize, with future prices potentially moving toward the range of 100,000 to 110,000 CNY per ton.

In the short term, we need to be vigilant about the risk of a high-level pullback in copper prices. Current copper prices have already fully priced in optimistic expectations; should the Federal Reserve slow down its pace of interest rate cuts, downstream demand weaken, or mine production resume faster than expected, these factors could all trigger a technical correction.

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