Copper Prices on Track to Climb Further in 2026, Backed by Growing Optimism and Robust Fundamentals:【Takeaway from SMM Copper Conference】

On October 30, at the main forum of the CCAE2025 SMM (14th) Copper Industry Annual Conference and the 2nd Shanxi Copper-Based New Materials Industry Chain Development Conference, hosted by SMM Information & Technology Co., Ltd. and Zhongtiaoshan Nonferrous Metals Group Co., Ltd., Ye Jianhua, SMM Big Data Director, analyzed the current market uncertainties, supply and demand, and prices in the copper market, discussed the impact of factors such as Trump's policies, mine production, trade patterns, and the supply-demand balance on the market, and provided an outlook on the future trends of the copper market.

Macro: Market Uncertainty and the Impact of Trump's Policies

►Increased Market Uncertainty

The US reciprocal tariffs, anchored on the "trade deficit," aim to address the $37 trillion national debt and reshore manufacturing; the uncertainty they bring has led to severe market fluctuations.

Sharp Price Volatility: He pointed out that this year's market uncertainty stems from factors such as industry and macro aspects, which have intensified market uncertainty, also increasing the difficulty of market analysis and research. For example, after Trump entered the White House, his tweets affected global commodity price fluctuations; the US tariff increase policy in March-April caused market panic, and copper prices fell by the daily limit after the Qingming Festival.

Shift in Market Expectations: Trump's tariff policies have prompted some manufacturing to return to the US, such as investments and expansions by South Korean cable factories and Chinese copper pipe & tube factories in the US. However, long-term tariffs will pose challenges to manufacturing in other countries.

Economic and Trade Games and Tariff Shocks

Frequent Sino-US economic and trade talks: After the US announced the implementation of reciprocal tariffs in April, China and the US have held five rounds of economic and trade talks. The market is also focused on the meeting between the heads of state of China and the US in South Korea, which may affect short-term fluctuations in non-ferrous metals such as copper.

Tariffs are unfavorable for commodity prices: Each tariff shock is unfavorable for commodity prices, especially base metals. For instance, the prices of gold and silver are affected. The market worries that the establishment of trade barriers will disrupt the global economy, driving precious metal prices to repeated new highs. However, after the recent pullback and adjustment in gold and silver, there has been capital outflow, with some funds flowing into the non-ferrous metals sector.

Manufacturing PMIs of major global economies are below 50. Affected by geopolitical conflicts and US tariff policies, the copper/gold ratio declined, indicating strong market risk-off sentiment.

He elaborates by combining the trends in recent years of manufacturing PMIs of major global economies, US CPI, the copper/gold ratio, LME copper, and the US dollar index.

►Weakening US Dollar and Eroding US Dollar Credibility Also Push Up Copper Prices

The US Dollar Enters an Interest Rate Cut Cycle

Interest rate cut magnitude forecast: The US Fed announced a 25-basis-point interest rate cut on Wednesday, meeting market expectations. This is also the Fed's second 25-basis-point rate cut this year. The market generally expects that from last September to the end of this year, the cumulative interest rate cut by the Fed will be about 175 bps, marking the official entry of the US into an interest rate cut cycle. The current US dollar index is hovering below the 100 mark. Recently, influenced by expectations of monetary easing from Japan's new prime minister, the US dollar experienced a short-term rebound.

Long-term weakening trend: In the long term, the US interest rate cut cycle is not over yet, and the US dollar will continue to weaken.

US Dollar Credibility Questioned: The public dispute between Trump and the US Fed on Twitter has sparked market concerns about the Fed's independence and the credibility of the US dollar. This is an important reason driving the continuous rise in gold, silver, non-ferrous metals, or virtual currencies. The weakening of the US dollar or the erosion of its credibility will also push up copper prices from a financial perspective.

Fundamentals

►Copper Market Supply Situation

Tight Copper Concentrates Lead to Continuous Decline in Spot TCs, Smelters Gradually Feel Loss Pressure

Record Low TCs: Copper concentrate TCs in China have once again pulled back to low levels. Previously, they experienced a historically low point in Q3 of last year, and now they are falling into depression again. The persistent low TCs will provide stronger valuation support for copper prices, further pushing up their value center.

Downward Revision of Production Increase: Frequent mine disruptions in 2025 have brought many unexpected disturbances, such as production interruptions at Chile's El Teniente, DRC's Kamoa-Kakula, Indonesia's Grasberg, China's Inner Mongolia Mining, Canada's Snow Lake, and Chile's QB, all causing varying degrees of negative impact. SMM expects global copper concentrate sulfide ore production to reach 19.48 million mt in metal content in 2025, with a YoY decrease of 220,000 mt in metal content. Unexpected reductions in mine supply directly lead to a deterioration in the global copper concentrate supply-demand balance, and since entering Q3, all institutions have started to revise down the global copper mine increment.

Increased Future Disruption Rate: Undoubtedly, supply-side disruptions negatively affect the operations of global smelters, putting direct pressure on raw material supply. The future disruption rate of mines is worth noting; for example, Indonesia's Grasberg mine, with an annual output of about 800,000 mt in metal content, has had a significant impact on production in Q4 this year and H1 next year due to its accident.

Combining SMM's analysis of global sulfide copper ore increments (2019-2030E) and global copper concentrate supply-demand balance (2025E-2030E): The mismatch in global copper ore supply and demand remains one of the key factors in boosting copper price valuations.

Low Self-Sufficiency Rate of Copper Resources in China

Pessimistic Expectations for Supply Increment: The long-term increase in copper concentrate supply is limited. Although there are changes projected for 2026-2027, this year's situation suggests that the statistical increments may be overly optimistic. Moreover, most of the increments come from expansions of existing mines, with few greenfield projects, and investors are reducing investments in mines due to increased risk premiums.

Intensified Competition for Copper Scrap

•Capacity Adjustment and the Critical Role of Copper Scrap

The core issue in the global copper market's capacity structure stems from the mismatch in growth rates between smelting and refining capacity, a pattern evident in both domestic and overseas markets. Domestically, refining capacity growth consistently outpaces smelting capacity, inevitably creating a raw material supply gap. Theoretically, copper anode and copper scrap are key resources to fill this gap. Although overseas copper anode capacity expansion plans exist, they essentially represent cross-regional transfers of copper concentrate raw materials rather than substantive capacity additions. More critically, the growing global shortage of copper concentrate raw materials directly constrains the achievement of overseas smelting capacity growth targets and may even lead to a decline in global smelting production, further widening the actual gap between smelting and refining capacity worldwide.

Impact of Capacity Optimization on the Supply-Demand Pattern: Against the backdrop of a continuously widening gap between smelting and refining capacity, adjustments in smelting capacity have become a key variable reshaping the global copper market's supply-demand pattern. If more smelting capacity is optimized through reduced utilization rates or market exit in the future, the global copper market will undergo a phased transformation of "shortage-balance-stability." The market is currently in a clear supply shortage phase: copper concentrate shortages restrict smelting capacity growth, while refining capacity continues to expand. These opposing movements in supply and demand continually widen the gap, making it difficult for market supply to match demand growth, which also provides strong support for copper prices. As capacity optimization measures are implemented, market supply will gradually enter a regulatory phase: lower capacity utilization rates directly reduce current production, avoiding market disruptions caused by oversupply; the exit of some inefficient capacity further optimizes market structure, concentrating resources in efficient capacity and improving overall supply quality. Through these adjustments, the global copper market will gradually transition from the current shortage to a supply-demand balance, ultimately forming a stable pattern without surplus.

Copper Scrap as a Key Force in Filling the Supply Gap: Against the dual backdrop of constrained copper concentrate supply and the time still needed for capacity optimization, copper scrap has become a critical supplement to alleviate raw material shortages. A global wave of integrating scrap into the smelting system is underway. Market practices show that countries are increasingly utilizing copper scrap resources: China significantly increased the proportion of scrap entering its smelting system last year and this year, while major markets like South Korea, Europe, and Japan are also continuously boosting their intake of scrap. The share of copper scrap in smelting raw materials is rising, effectively easing the pressure from copper concentrate undersupply. However, it is important to note that copper scrap is not an infinitely available resource; its scarcity has become evident in market competition—intense competition between India and China for raw materials like blister copper, copper anodes, and scrap has reached a fever pitch this year, further underscoring the strategic value of copper scrap resources. Comprehensive industry estimates suggest that, through dual adjustments of capacity optimization and scrap supplementation, market pressure from ore supply tightness will gradually ease. This adjustment process is expected to continue until 2028 or even 2029.

• Evolution of Pricing Mechanisms and Changes in Market Structure:

The pricing logic of the future copper raw material market will undergo a significant shift. Currently, blister copper imports are mostly traded via long-term contracts. However, as materials like blister copper and copper anodes become core resources in global competition, their pricing may gradually align with copper concentrates, and the trend toward spot pricing models will become more pronounced. The essence of this change is that, against the backdrop of tight raw material supply, global competition for smelting raw materials has entered an intense phase.

In terms of market structure, China's imports under the copper anode code have decreased by approximately 200,000 mt this year. Simultaneously, the flow of copper scrap in China is being reconfigured; scrap that was previously used more for copper rod production is now being extensively processed into copper anode plates in regions like Jiangxi, Anhui, and Hubei for delivery to smelters. This transformation process will continue, serving as an important pathway for scrap to supplement smelting and alleviate the ore supply deficit.

Copper Market Demand and Consumption Trends

Global Copper Consumption in New Energy Sector: Growth Trend Insights from 2025 to 2030

• Consumption in New Energy Sector: Growth Under Pressure but Support Remains Solid

The analysis, incorporating global NEV production (2025-2030E), global PV installations (2025-2030E), global wind power (2025-2030E), copper consumption in the PV, wind power and NEV sectors, global copper consumption, the proportion of copper used in the PV, wind power and NEV sectors, and copper consumption in traditional sectors, indicates that global copper consumption in the new energy industry is projected to continue growing from 2025 to 2030, with both the Chinese and overseas markets showing an upward trend. The proportion of copper used in PV, wind power, and NEVs is gradually increasing, and the growth in NEV production will also drive copper demand, becoming a key support for copper consumption.

Despite challenges from declining unit consumption—copper usage per unit for PV, wind power, and NEVs has pulled back compared to previous levels—the substantial growth in overall installation scale and production-sales base means that the drop in unit consumption has only slowed the consumption growth rate, without leading to a contraction in demand. Meanwhile, at this stage, the use of aluminum as a substitute for copper does not yet pose a substantial threat to copper consumption; whether in traditional sectors such as home appliances and the power grid, or in new energy-related scenarios, there are no clear signals of large-scale substitution of copper by aluminum, further solidifying the foundation for copper demand in the new energy sector.

• Consumption in Emerging Sector: Potential Release Unlocks Growth Space

Beyond the traditional new energy sectors, the consumption potential of new scenarios is gradually emerging. Although the current base for copper consumption in data centers is less than 600,000 mt (globally), the growth rate is notable. Future large-scale construction is expected to drive demand for supporting power grid upgrades, particularly in regions with concentrated data center development such as the US, Europe, and China, which may generate additional copper consumption related to grid upgrades.

Moreover, the global shift and expansion of manufacturing toward Southeast Asia and the Middle East will directly spur local infrastructure construction and production-equipment investment, continuously releasing copper demand. Overall, demand growth from new sectors, combined with solid support from the new-energy segment, leaves little cause for excessive concern on the copper-consumption side.

Inventory–Price Relationship

China Inventory: By the end of this year, domestic copper cathode inventory had risen by roughly 150,000 mt compared with the end of last year. Yet the inventory is highly susceptible to swings in exports and production.

Tight Overseas Inventories: Global copper cathode inventories have rebounded to about 800,000-plus mt, yet nearly half of the metal had flowed into the US because of price spreads and is unlikely to exit in the near term.Combined LME reported and unreported stocks remain low, making the total inventory look extremely low relative to massive global demand. Overseas inventories are tighter than those in China, keeping overseas prices persistently above domestic levels.This tightness abroad and the sustained price premium place heavy pressure on China’s raw-material import window.

Copper Market Price Trend and Outlook

Copper Cathode Price Support

• Trade Pattern Impacts Prices:

This year’s reshaping of the global copper cathode trade pattern was driven chiefly by a record-wide price spread between COMEX and LME copper, triggering a structural shift in global copper flows and providing strong price support.

As early as January-March, expectations of US copper-related tariffs began to build. Although the Trump administration had not yet enacted any measures and the so-called reciprocal tariff remained undefined, several large international traders moved first, actively arranging shipments to the US. During this phase, the dual logic of “cross-market arbitrage plus tariff hedging” dominated, pushing copper prices steadily higher. From April to July, even as prices experienced periodic pullbacks, the flow of material toward the US did not stop, and the global tilt in copper flows continued to intensify.

After the Trump administration's tariff policy officially took effect in September, the market found that copper cathode was not included in the list of additional tariffs, with the scope of the tariffs only covering semi-finished copper products (such as telecom cables, enamelled wire, etc.). Although this outcome exceeded some market expectations, it did not reverse the upward trend of copper prices—the core reason being that the cross-market price spread still offered substantial arbitrage opportunities, allowing copper resources from regions like South America and Africa to be shipped to the US for high profits. At the same time, the long-term optimistic outlook for copper prices in the US market pushed the COMEX market into a significant contango structure. For those holding warrants, the premium gained from holding these warrants even exceeded the profit from spot sales, further stimulating the concentration of resources in the US.

Starting from late September, resource reallocation similar to that seen in H1 reoccurred: some Korean and South American copper resources originally destined for China were acquired at higher prices by traders before arrival and resold to the US. This action directly intensified the global supply-demand tension, causing overseas premiums for copper cathode to surge. Premiums for European Aurubis and South American copper cathode shipped to Europe reached $315/mt and $325/mt, respectively, both setting new historical records. More critically, the continuous concentration of resources in the US led to a constant depletion of LME inventories, with current LME reported inventory standing at 130,000 mt. When combined with unreported off-exchange inventories, the total is less than 160,000 mt. The extremely low inventory levels further solidified the support base for global copper prices, becoming one of the key reasons for maintaining high copper prices next year. Additionally, the market's expectation of a possible expansion of US tariffs in the future has not dissipated, providing sustained momentum for the concentration of resources in the US.

Price differences and import pressure: Overseas prices consistently remained higher than domestic prices, putting significant pressure on China's raw material imports. For example, US imports increased substantially in H1, with normal monthly imports around 60,000-70,000 mt, but during the peak period in H1, they reached 210,000-220,000 mt. Even in August and September, imports remained at a high level of 140,000-150,000 mt, far exceeding historical norms.

Market Balance and Price Forecast

• Global Market in Tight Balance Next Year:

From the perspective of the Chinese market, the domestic copper cathode market exhibited a slight surplus this year. Detailed calculations of copper cathode consumption across various processing sectors reveal that China, as the world's largest consumer of copper cathode, holds an extremely high share of global consumption. Particularly in sectors related to electrical industrialization, copper's core role is irreplaceable—almost all industries associated with electrical industrialization rely on copper applications, making this sector the absolute primary driver of copper cathode consumption. For rapidly growing areas of market focus, such as copper foil, the raw materials primarily come from copper scrap and copper rod, rather than directly consuming large amounts of copper cathode. Therefore, their impact on the overall copper cathode consumption structure is relatively limited. Overall, China's dominant position in global copper cathode consumption is difficult to shake in the short term, and this status provides crucial support for the global copper market's supply-demand balance.

Analyzing from a global supply-demand balance perspective, the global copper market will formally enter a state of tight balance next year. In the long term, resource issues will become a key bottleneck constraining copper cathode supply, thereby providing sustained support for copper prices.

Demand side, performance is strong, with the reindustrialization process in Europe and America and ongoing power grid renovation plans, while the Southeast Asian market also maintains rapid development. Although the global overall supply and demand appear loose, inventory accumulation over the past two years has been limited, and regional supply-demand mismatches are prominent.

Focusing on the Chinese market, the growth rate of domestic copper cathode consumption from 2025 to 2026 will outpace the rate of capacity release. Specifically, from the second half of 2025 into 2026, regional supply gaps in Southeast Asia and fluctuations in the SHFE/LME price ratio will further boost Chinese copper cathode export demand, prompting domestic smelters to actively destock. Even as domestic smelting capacity continues to expand, constraints on ore supply due to disruptions in copper concentrate availability remain the primary challenge. The overall structure of the supply-demand balance table is tight, which echoes the global tight balance scenario.

• Price Optimistic Expectations:

Based on the above supply-demand pattern analysis, market optimism toward copper prices continues to build. Judging from supply and demand fundamentals, copper prices are expected to potentially trend higher in 2026.

Current market sentiment has fully reflected this optimistic outlook; aside from necessary hedging operations, bearish voices in the market have notably diminished. The core supporting factors stem not only from the fundamental supply deficit of raw materials but also from the enhanced attributes of copper itself—copper combines financial characteristics with critical mineral properties. Against the backdrop of global energy transition and strategic competition among major powers, its strategic value continues to rise, driving a sustained increase in valuation levels. In the long term, if resource constraints are not effectively alleviated, copper prices are expected to fluctuate at highs under a tight balance.