Copper Tops $12,000 as Mine Woes, Tariff Trade Tighten Supplies
(Bloomberg)– Copper prices rose above $12,000 a tonne for the first time, extending the metal’s recent rally as mine outages add to concerns over supplies of the vital industrial metal.
Benchmark prices rose 2% on Tuesday on the London Metal Exchange, to $12,159.50. The metal has gained more than 35% this year and is on track for its biggest annual rise since 2009.
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The threat of U.S. tariffs on imports of the metal has also been a major factor in rising prices this year. Copper is accumulating in US warehouses as the possible imposition of new levies encourages buyers to secure their shipments and opens commercial arbitrage.
“The U.S. is still in stockpiling mode, and I expect that to continue until we get more information from the U.S. government,” said Helen Amos, commodities analyst at BMO Capital Markets Ltd.
Supply risks, which have been significant for years, have started to come to the forefront in recent months as a key market driver. A fatal accident at the world’s second-largest copper mine in Indonesia, an underground flood in the Democratic Republic of Congo and a deadly explosion at a mine in Chile have combined to cripple global production.
At the same time, the demand outlook remains strong due to long-term trends toward electrification, with massive quantities of the metal needed to build power grids, new energy infrastructure and manufacturing. Investors are also betting that copper consumption will increase further to meet the growing energy needs of the artificial intelligence sector.
Industry analysts have said that much of the richest and most easily accessible mining resources are now exhausted, and some have expressed concerns about where new supply will come from over the next decade and beyond to meet expected growth in consumption.
Overall, experts warn that the market is on the verge of a major deficit.
A number of mining companies have lowered their production forecasts this year. Deutsche Bank has warned that output at the world’s largest mining companies will fall 3% this year and could fall again in 2026.
Even if global inventories are sufficient for now, analysts at Morgan Stanley predict that the global copper market will face its most serious deficit in more than 20 years. The bank expects demand to exceed supply by around 600,000 tonnes next year and sees deficits worsening from there.
