Chile has lowered its copper production forecast for the second consecutive quarter, driven by falling output from some of its largest mines.
The Chilean Copper Commission (Cochilco) predicted on Tuesday that the country's copper production will decline by 2.6% to 5.27 million metric tons in 2026, weighed down by weak output from state-owned Codelco and mines operated by BHP Group Ltd in Chile. This revised forecast is lower than the previous quarter's estimate of 300,000 tons and also below the earlier projection of 5.6 million tons.
Cochilco attributed the weak 2026 outlook to a particularly sluggish first half of the year, marked by declining output from Codelco, BHP's Escondida and Spence mines, alongside structural constraints at several operating sites. Data shows that Chile's copper production fell by about 9% year-on-year in the first five months of 2026, with April and May seeing declines of approximately 14% and 13%, respectively.
The agency noted that production is expected to partially recover in the second half of the year, supported by improvements at Codelco's El Teniente mine, progress at its Rajo Inca project, increased stability at Teck Resources' Quebrada Blanca mine, normalized operations at Capstone Copper's Mantoverde mine, and better ore and water conditions at the Collahuasi mine, which is jointly owned by Anglo American, Glencore, and a Japanese consortium.
Meanwhile, Cochilco expects a rebound in copper production in 2027. The agency forecast that output will recover to 5.55 million metric tons next year, supported by a lower comparison base and gradual operational recovery and capacity ramp-up. Major contributions are expected from Codelco, Quebrada Blanca, Escondida, Collahuasi, Los Pelambres, and Mantoverde.
Cochilco also raised its average copper price forecast for 2026 to $5.95 per pound and maintained its 2027 estimate of $5.10 per pound, citing strong global demand and persistent supply constraints that will keep the market tight. The agency stated that global copper demand is expected to reach 27.8 million metric tons in 2026, a 1.9% increase, with China as the primary driver, where consumption is projected to grow by 2.7% to 16 million metric tons, accounting for 57.6% of global demand.
Why the supply concerns are intensifying
Cochilco's latest adjustment to Chile's copper production forecast has further heightened market concerns about global copper supply. Mine disruptions and declining ore grades are limiting production growth, even as demand from electrification, grid construction, and data centers continues to rise.
Cochilco projects that global copper mine output will grow by only 0.2% this year, meaning that even if the refined copper market remains in a slight surplus, the global supply cushion against further production disruptions is very limited.
Copper prices are trading near historic highs as investors await the Trump administration's decision on tariffs for refined copper and amid ongoing uncertainty over the navigability of the Strait of Hormuz. Although the June 30 deadline for Commerce Secretary Howard Lutnick to submit tariff recommendations has passed, the White House has yet to announce a final policy. Producers, consumers, and traders are closely watching whether Trump will expand trade protections currently targeting semi-finished copper products to raw materials like refined copper. However, no timeline has been set for the administration's final decision on whether to impose tariffs on refined copper.
Driven by tariff expectations, copper inventories on the U.S. COMEX exchange have risen over 40% this year to an all-time high. Market estimates suggest total copper stocks in the U.S. now exceed 1 million metric tons. Amid rapid development in grid construction, artificial intelligence, electric vehicles, and defense industries, copper is becoming an increasingly important strategic resource for the U.S., and tariff expectations have objectively accelerated the country's build-up of strategic stockpiles.
Behind the rising U.S. copper inventories lies a continuous drain on stocks in other regions. Higher U.S. import tariffs are diverting large volumes of copper to American ports, tightening supply elsewhere. Data shows that the U.S. imported approximately 200,000 metric tons of copper in July, the highest monthly figure since IHS Markit began tracking in 2014 and the fastest import pace in at least 12 years. About 110,900 metric tons of copper are currently held outside of London Metal Exchange warrant systems at U.S. ports.
In the Middle East, market concerns about further escalation of the U.S.-Iran conflict are shifting toward expectations of a deal to reopen the Strait of Hormuz. According to the latest reports, Pakistan's Defense Minister Khawaja Asif stated on August 11 that the U.S. and Iran are close to reaching "some sort of arrangement." Asif said in an interview that "signals over the past two or three days suggest we are near an agreement." Most commodities, including base metals like copper, stand to benefit from efforts to resolve the Middle East conflict that has impacted global markets this year.
This latest wave of optimism has eased inflation concerns, and coupled with weak U.S. nonfarm payroll data last week, it has prompted traders to reduce bets on the Federal Reserve raising interest rates for the remainder of 2026. This is positive for base metals, which are highly correlated with global economic growth expectations.
Long-term copper price outlook remains strong
In the medium to long term, copper prices are expected to find support. On the demand side, copper is widely used in electric vehicle batteries, data centers, and other sectors. With the global surge in AI computing infrastructure, data centers are becoming a major new source of copper demand. This traditional industrial metal, with its irreplaceable electrical and thermal conductivity, is a core material supporting the AI industry.
A report from Morgan Stanley predicts that global copper consumption from data centers will rise to 740,000 metric tons in 2026, contributing 0.6 percentage points to global copper demand growth. By 2027, data center copper consumption could reach 1 million metric tons (2.8% of total demand), and further increase to 1.3 million metric tons (3.3% of total demand) by 2028, with a compound annual growth rate of 40%.
Jefferies estimated in a previous report that global copper demand will reach 30.93 million metric tons by 2030, with a compound annual growth rate of 2.1% from 2025 to 2030. Electric vehicles will lead the growth at 9.6%, followed by data centers and renewable energy (wind and solar, excluding grids) at 6.1% and 6.7%, respectively. Supply, however, will struggle to keep pace, with global copper supply projected at only 30.09 million metric tons in 2030, implying a deficit of about 840,000 metric tons.
Based on this deficit, Jefferies sets a forward price target of $6.50 per pound ($14,330 per metric ton) for copper by 2030. The firm stated, "Even in a world with only 2% global GDP growth, the copper market will face a significant supply-demand deficit over the next 12 months and beyond." This suggests that the core driver of this copper price rally is not short-term sentiment driven by macro optimism, but a genuine "physical shortage" on the supply side. The copper market may be moving away from the traditional cyclical pattern of "three years up, two years down" and is likely entering a multi-year period of supply-demand mismatch.
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