As copper prices surged 22% in a single month, breaking through the critical $13,000 per tonne level, a significant divergence has emerged on Wall Street regarding the future trajectory of this vital industrial metal.
According to information, a team of analysts led by UBS's Daniel Major warned in a report issued on January 12th that despite the recent price spike, final investment decisions (FID) for mining company projects remained at extremely low levels between 2023 and 2025. Furthermore, the shift in the capital expenditure cycle is lagging, signaling a severe structural shortage in the copper concentrate market for 2026/27.
This structurally bullish view stands in stark contrast to the short-term cautions from Goldman Sachs and Citi. While both recently raised their near-term price targets, they concurrently warned that current prices are being driven by "stockpiling" spurred by expectations of US tariffs. Goldman Sachs believes that once tariff policies become clearer in the second quarter, ending the stockpiling behavior, the market will once again face the reality of a global surplus; Citi was even more direct, stating that "January could be the price peak for the entire year."
This intense clash between bullish and bearish perspectives is pulling investors' focus away from short-term macro speculation back to the industry's most fundamental question: against the backdrop of surging demand from the energy transition, is the global mining industry capable of supplying enough copper? UBS's data provides a pessimistic answer—the efficiency of capital investment is declining sharply, while new supply is failing to materialize promptly.
UBS's report, titled "Copper: Capital Expenditure Cycle Intensifies Supply Challenges," reveals a fact that excites long-term bulls but alarms downstream users: mining companies are spending money, but their efficiency is plummeting.
UBS points out that while the medium-term market consensus on copper has been bullish for the past decade, the supply side has always managed to "squeeze out" enough copper to avoid shortages. This time, however, is different. Despite major miners holding increasingly optimistic long-term views on copper and new projects showing robust returns, the number of project Final Investment Decisions (FID) for 2023-2025 remains low.
The core data is startling:
Actual investment shrinkage: Global copper industry capital expenditure appears stable at around $40 billion nominally, but when adjusted for inflation, real capex in 2025 is only about 30% of the 2013 peak level and has been on a downward trend for the past three years.
Soaring capital intensity: Money is buying less. After reviewing the project pipeline, UBS found that the average capital intensity for potential projects likely to be approved between 2025-2030 (approximately 11 million tonnes of capacity) is about $25,000 per tonne. In comparison, projects approved/completed between 2021-2025 (approximately 3.8 million tonnes) were only $17,000 per tonne.
This implies: A 50% increase in capital intensity. In other words, where $1 billion previously bought about 60,000 tonnes of additional copper, the same $1 billion will now only secure about 40,000 tonnes.
The team led by UBS analyst Daniel Major stated bluntly: "Despite mixed demand prospects, analyzing the capex cycle convinces us that the copper market will enter a deficit in 2026/27, with inventory drawdowns supporting further sustained price increases."
To quantify the severity of the supply crisis, UBS built a long-term model. The model shows that under a "base case" scenario considering only currently approved or highly probable projects, global mine supply will peak between 2028-2030 before beginning to decline. By 2035, the supply-demand gap will widen to a staggering 7 million tonnes.
UBS calculates that to fill this gap, the industry needs to act immediately:
New project capital expenditure must increase to $5 billion by 2026;
It needs to grow to $20 billion annually by 2030 and be maintained until 2035;
Cumulative new project spending exceeding $175 billion is required.
However, the reality is not optimistic. New project approvals in 2023-2024 remain near cyclical lows. Although approvals are expected to rebound to about 800,000 tonnes in 2025, considering the 3-4 year construction cycle, this pace is still insufficient to meet demand growth.
UBS believes current spot prices are at or above levels that incentivize investment in new projects. The bank calculates that, based on a 15% internal rate of return (IRR) hurdle, the long-term copper price needs to be $5.0 per pound (approximately $11,000 per tonne) to incentivize most new projects.
Despite prices meeting this threshold, the supply response remains sluggish. UBS notes that while capital allocation priorities for giants like BHP and Rio Tinto have shifted towards growth, they are increasingly favoring mergers and acquisitions (M&A) to acquire existing resources rather than undertaking the high risks of developing new mines.
The report lists key projects potentially reaching Final Investment Decision (FID) in the next 2-3 years, including expansions at Chile's Escondida and Spence mines, Argentina's Vicuna and Mara projects, and the US's Bagdad and Resolution projects.
UBS suggests that with the implementation of Argentina's RIGI Act (Regime for the Promotion of Large Investments) and potential improvements in the US regulatory environment, some projects may accelerate. However, overall, "the pace of capital deployment is still unlikely to prevent a slowdown in supply growth over the next 2-3 years."
Consequently, the market requires a prolonged period of high prices to stimulate substitution demand or curb consumption.
In contrast to UBS's focus on long-term supply constraints, Goldman Sachs and Citi are concentrating on short-term anomalies on the demand side. Their conclusions are strikingly similar: the recent surge has been too rapid, and a correction is likely.
Citing a Goldman Sachs research report, the bank's analyst team led by Eoin Dinsmore pointed out that the recent copper price surge is primarily driven by "US stockpiling." Market concerns about potential US tariffs on refined copper have led to large volumes of metal being drawn into the US market. Goldman warns that once tariff policy becomes clear in Q2 (whether delayed or implemented), the stockpiling incentive will vanish, and market focus will return to an expected global surplus of 300,000 tonnes in 2026. Goldman maintains its forecast for prices to retreat to $11,200 per tonne by Q4 2026.
Citi's view is more aggressive. In a January 6th report, the team led by Tom Mulqueen noted that while they raised their short-term target to $14,000 per tonne, "January could be the price peak for 2026." Citi warns that prices above $13,000 will stimulate a surge in scrap copper supply, thereby balancing the market. Barring a new macro catalyst, prices will ultimately fall back to the $13,000 per tonne level.
UBS, in its report, countered the limitations of this short-term perspective. While acknowledging the recent rally is driven by investor positioning and that short-term prices may face consolidation, UBS emphasized that "the contrast between supply challenges and resilient demand creates a compelling fundamental story." UBS firmly believes that 2026 will be the year the market truly feels the "physical tightness," with continued inventory drawdowns supporting further price increases.
In summary, the current copper market presents a deeply fragmented picture:
Long-term logic (UBS): Inadequate mining investment and soaring costs are irreversible physical constraints, making a 2026/27 shortage unavoidable. Current prices are merely the prelude to a long-term bull market.
Short-term logic (Goldman/Citi): The recent surge is built on a fragile equilibrium of "tariff panic" and "US stockpiling." Once policy uncertainty is removed, the underlying surplus will pull prices back down to earth.
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