Copper hit a fresh all-time high as the London Metal Exchange benchmark three-month futures price climbed to $14,533 per metric ton.
The copper rally, which lifted prices about 17% over the past year, has both short-term and long-term drivers. The first is the distortion from the looming U.S. tariffs on refined imports, while the second is the deep-seated mismatch between constrained supply and long-term electrification demand.
While inventory flows and speculative positioning have kept the tariff story in the headlines, the main issue lies underground. Operational issues at the world’s largest mines are meeting accelerated consumption from the ongoing technology transition, driving a multi-year structural deficit.
Aging Mines and Slumping Output
Global copper mine production declined 1.1% in the first half of the year, according to the International Copper Study Group, raising the prospect of the first annual supply contraction since 2017. Morgan Stanley, which entered the year expecting growth, now sees output little changed or slightly lower.
Chile, which accounts for roughly a quarter of global mined output, has been at the center of the disappointment. The country posted its weakest second-quarter production in at least 19 years as severe winter storms, port closures and declining ore grades hampered operations. August export values slumped 14% from July to $4.62 billion, the lowest monthly tally in more than a year—despite average prices running more than 40% above year-earlier levels.
Leading operators including Codelco and Freeport-McMoRan, Inc. (NYSE:FCX) registered double-digit production declines amid accidents, weather events and aging assets.
“It’s declining grades at existing operations,” Evy Hambro, BlackRock’s thematic and sector investing global head, said in a Bloomberg Television interview. “It’s tired, very, very old assets. It’s a lack of new development of supply coming into the market.”
The friction is sharpest between mines and smelters. Smelting capacity continues to expand, particularly in Asia. The trend drives competition for scarce concentrate and pushes refining charges toward zero or even negative.
Morgan Stanley expects refined output to rise about 0.9% even with flat mine supply—masking the severity of upstream constraints.
The Runaway Capex
Structural pipeline deficits compound the problem. Sharp cuts to mining investment after the commodity downturn a decade ago left a thin project pipeline, and lengthy permitting means meaningful new mine supply is unlikely before 2030.
Yet, during that time, the capital expenditures pressure continues to pile up. The number frequently mentioned by Rick Rule and other veteran investors is 250 billion in 2025 U.S. dollars required to merely keep ongoing production by 2035 – a sum potentially climbing over $400 billion in the 2030s.
That funding is needed just to keep the ongoing production that’s already in a deficit. The number needed to meet market demand is likely much higher. Under these conditions, a long-term price squeeze becomes a certainty, but even short-term expectations remain high.
Citigroup analyst Tom Mulqueen forecasts $15,000 a ton by year-end, with potential for roughly $17,000 if manufacturing recovers or energy-transition and data-center demand proves stronger than expected.
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