Copper prices have surged to unprecedented levels, with tightening supply-side expectations emerging as a key pillar of support for the rally.
On September 8, three-month copper on the London Metal Exchange (LME) touched $14,694 per metric ton intraday, setting a fresh all-time high before closing at $14,673, up 1.5% on the day. As copper broke through its previous peak, mining stocks rallied in tandem, with Freeport-McMoRan climbing more than 7% during the session and extending its year-to-date gains to roughly 44%.
More notably, the outlook for global copper mine supply is shifting. Morgan Stanley has downgraded its previous forecast for global mine supply growth to roughly flat or even slightly negative, and if realized, global copper mine output could post its first annual decline since 2017. Meanwhile, Chile has cut its full-year production outlook for a second consecutive quarter, while potential U.S. tariffs sparking a rush to stockpile have further exacerbated global inventory imbalances.
Copper Hits Record Highs as Morgan Stanley Cuts Global Supply Forecast
Changes on the supply side are becoming a key catalyst for copper's breakout to historic highs.
Chile, the world's largest copper producer, continues to see lackluster output. The country's second-quarter copper production hit its weakest level in at least 19 years, and it has downgraded its full-year output forecast for a second straight quarter, now expecting a 2.6% decline for the year. Against this backdrop, Morgan Stanley has reversed its earlier view of expanding global mine supply, trimming its expectations to roughly flat or even slightly lower.
If this projection holds, it would mark the first annual drop in global copper mine supply since 2017. Ruben Fernandes, chief operating officer at Anglo American, also noted that supply will eventually increase, but the key question lies in the pace at which additional volumes come online.
At the same time, potential U.S. tariff policies are creating short-term supply dislocations. Concerns that Washington may impose tariffs on copper have prompted shipments to flow into the U.S. ahead of time, with inventories from other global regions steadily shifting toward American ports. Slower mine supply growth, combined with inventory redistribution, is heightening tightness in the spot market.
Tighter Supply Coupled with Demand Expectations Leaves Room for Further Copper Gains
The record copper price is also rapidly feeding through to miners' earnings expectations. Freeport-McMoRan's management estimates that for every 10-cent rise in copper prices, the company's annual EBITDA increases by approximately $390 million. If copper holds at $5 per pound, EBITDA for 2027-2028 is projected to reach $13 billion, while a price of $7 per pound could push that figure to $20 billion.
Demand-side catalysts are also lurking. Tom Mulqueen, an analyst at Citi, expects copper to rise to $15,000 per metric ton by year-end, and if manufacturing recovery, the energy transition, data center construction, or strategic reserve demand exceed expectations, prices could even climb further to $17,000.
Therefore, the current copper price narrative is no longer just a short-term rally driven by stockpiling. Slower or even negative mine supply growth, combined with inventory dislocations from U.S. tariff expectations, alongside structural demand growth from data centers and the energy transition, are jointly reinforcing expectations of a tight copper market balance.
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