Analysis of Structural Deficiency, Price Dynamics, and Industrial Transformation

Copper Landscape at the Threshold of 2026: Records, Volatility and a New Era of Raw Materials

The beginning of 2026 brought a fundamental shift in the perception of industrial metals in global financial markets. Copper, deemed for decades as a reliable indicator of global economic activity, has ultimately shed its role as a cyclical marker, becoming a strategic and critical asset whose price reflects geopolitical and technological ambitions of powerful nations rather than current industrial output. At the close of trading on 5 January 2026, the copper price on the London Metal Exchange (LME) set a new historical record, surpassing for the first time the psychological barrier of 13,000 USD per metric tonne. At its peak trading moment, futures contracts for three-month delivery reached the level of 13,020 USD, marking a daily increase of 4.3%. Although subsequent days saw a natural correction due to profit-taking by hedge funds, the stabilisation of prices around 12,500−12,700 USD suggests the market has entered a sustained regime of high valuations.  

The current boom is a direct continuation of the epic price rally of 2025, where copper gained over 43% in value, outpacing other industrial metals and becoming the best-performing commodity in investment portfolios since the financial crisis of 2009. Such sharp price increases are not the result of a single isolated event but the effect of accumulating structural factors, which analysts describe as a 'perfect storm'. At the core of this dynamic is a severe conflict between 'supply fragility' and 'demand rigidity', further exacerbated by unprecedented uncertainty in global trade policy.  

In January 2026, the copper market is characterised by extreme backwardation, which, in commodity market terminology, denotes a situation where the spot price (immediate price) is higher than the price of futures contracts for distant months. This is a clear alarm signal indicating a severe shortage of physical metal immediately available. Copper inventories registered in LME warehouses fell below the critical level of 100,000 tonnes in December 2025, constituting only a few days' global usage at the current consumption rate. This situation is paradoxical, as inventories on the Comex exchange in the United States have dramatically risen to record levels exceeding 457,000 tonnes. This geographical dislocation of stocks results from anticipated changes in American tariff policy, leading to massive redirection of refined copper deliveries to North America to avoid upcoming import duties.  

The table below presents a comparative overview of key price and operational parameters on major commodity exchanges at the start of 2026.

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Origins of Increases: Analysis of the Causes of 2025's Acute Shortage

Understanding forecasts for 2026 requires a thorough analysis of events from the previous year, which destabilised the supply fundamentals for copper. The market faced a series of 'black swan' events that drastically reduced mining output just as demand from new technologies began to accelerate rapidly.  

Supply Crisis: Series of Unfortunate Events in Key Mines

The most severe blow to global copper supply in 2025 was the disaster at the Indonesian Grasberg mine, the world's second-largest mining complex. On 8 September 2025, around 800,000 tonnes of water-saturated material (so-called mudrush) flooded many levels of the underground Grasberg Block Cave zone. This incident not only resulted in fatalities but forced the immediate suspension of all mining operations in this section, which accounts for nearly 70% of the mine's planned production. Freeport-McMoRan (FCX) declared force majeure, and subsequent revisions of production plans indicated that Grasberg's extraction in 2026 would be approximately 35% lower than originally expected, hovering around 1.0 billion pounds of copper instead of the anticipated 1.7 billion.  

However, Grasberg was not an isolated case. In the same year, Chilean giant Codelco had to halt mining at the El Teniente mine following the collapse of a tunnel caused by a seismic tremor in late July 2025. Further disruptions occurred at the Kakula mine in the Democratic Republic of Congo (underground flooding following earthquakes) and Kazakhstan's East Zhezkazgan mine. It is estimated that by the end of August 2025, global copper mining production losses amounted to nearly 500,000 tonnes, and considering the long-term effects of the Grasberg disaster, the total deficit of refined copper supply between September 2025 and the end of 2026 could reach up to 600,000 tonnes.  

The table below details key operational disruptions in 2025 and their direct impact on supply.

Demand Evolution: Copper at the Heart of the Technological Race

Parallel to the supply-side crisis, the year 2025 brought a redefinition of demand structure. Traditional sectors, such as residential construction in China, which historically constituted copper's strength, began to show weakness, but their place was more than filled by new growth vectors: artificial intelligence (AI), grid modernisation, and the defence sector.  

The share of copper used in the sectors related to new energy, the digital economy, and AI skyrocketed from 6.8% in 2021 to 19.4% at the beginning of 2026. Investors have begun to view copper as the 'linchpin' of electrification, without which it is impossible to meet decarbonisation goals or maintain the pace of computational infrastructure development. Demand from data centres became particularly noteworthy in 2025 when analysts noticed that modern AI server farms require even ten times the power and cooling density compared to traditional facilities, which directly translates into higher tonnage of high-purity copper.  

Price Forecasts for 2026: Institutional Scenarios

Given such a dynamic situation, leading investment banks and analytical institutions have revised their forecasting models for 2026. Although there is consensus on the long-term bullish fundamentals, forecasts for 2026 itself show some divergence depending on assumptions adopted regarding the condition of the Chinese economy and the pace of implementation of US tariffs.  

J.P. Morgan: Bullish Case Based on Refining Deficiency

Analysts at J.P. Morgan predict that the copper rally will not only be sustained but may accelerate in the first half of 2026. The bank forecasts that prices will reach an average level of 12,500 USD per tonne in the second quarter of 2026, with an annual average of about 12,075 USD. The main argument from J.P. Morgan is the projected shortage of refined copper at a global level of 330,000 tonnes. This stems from the fact that the increase in mining output has been limited to just 1.4% (500,000 tonnes less than planned at the beginning of 2025), making it impossible for smelters to meet the industry's growing appetite. An additional upside risk factor is demand from data centres, which is expected to rise by another 110,000 tonnes in 2026, reaching a total level of 475,000 tonnes of copper per year.  

Goldman Sachs: Consolidation and Tariff Risk

Goldman Sachs presents a slightly more nuanced approach, though it also revised its targets upwards. The bank raised its forecast for average copper price for 2026 to 11,400 USD from earlier 10,650 USD. According to Goldman, the copper market in 2026 may experience a surplus of 300,000 tonnes (an increase from earlier estimates of 160,000 tonnes), which should prevent prices from sustaining above the level of 13,000 USD. Analysts of this bank point to 'tariff uncertainty' – they expect that the announced introduction of duties on refined copper by the Trump administration (55% probability in the first half of 2026) will lead to further draining of stocks outside the USA, supporting prices in the short term, but after actual tariff implementation in 2027, market rebalancing and some easing of LME quotes will occur.  

The World Bank and PricePedia: Stabilisation Around Historical Highs

Other institutions, such as the World Bank, adopt more conservative assumptions, predicting an average copper price in 2026 at 9,800 USD per tonne. Conversely, PricePedia's model indicates an annual average of 10,863 USD, which would represent a 10% increase compared to the 2025 average. Experts from these institutions suggest that although copper remains expensive, global economic slowdown (forecasted GDP growth decline to 2.5%−2.7% in 2026) and high interest rates may limit growth dynamics in the second half of the year.  

The table below compares copper price forecasts for 2026 according to leading research centres.

Detailed Supply Analysis: Mining Facing Structural Challenges

The copper mining sector in 2026 finds itself at a turning point. A decade of underinvestment in new 'greenfield' projects has rendered the industry unable to quickly respond to unprecedented price signals. Experts indicate that the average time required to complete a copper project from discovery to full commercial production has extended to 17 years, owing to increasing environmental requirements, difficulties in obtaining permits, and the necessity to build infrastructure in increasingly inaccessible locations.  

Chile: "Copper Cannon" and Its Modernisation

Chile, as the world's largest copper producer, plays a crucial role in the 2026 balance. The government in Santiago, seeking to capitalise on high prices, accelerated work on 13 strategic copper projects valued at a total of 14.8 billion USD. Seven of these investments, including Codelco's structural Rajo Inca project and the infrastructure modernisation at Collahuasi (C20+ project), are set to commence operations in 2026, theoretically adding 500,000 tonnes to annual production capacity.  

However, analysts remain sceptical about the real impact of these projects on the market in 2026. Juan Ignacio Guzmán, director of consulting firm GEM, points out that these projects will not immediately reach full capacity, and the forecast net production increase for Chile in 2026 will likely be only 100,000 tonnes of fine copper, raising the country's total output to approximately 5.6 million tonnes. The ongoing decline in copper grade in old mines (grade degradation) remains a challenge, forcing companies to process increasingly larger amounts of material while maintaining the same costs.  

Freeport-McMoRan and Recovery Strategy

Freeport-McMoRan (FCX), as a leading stock-market producer, has adopted a dual strategy. On one hand, the company focuses on mitigating the effects of the Grasberg disaster, planning a phased restart of the Block Cave zone in the second quarter of 2026, with a return to full capacity only in 2027. On the other hand, FCX is developing innovative proprietary leaching technology, which allows copper recovery from existing waste heaps with low metal content using heat and specialised reagents. This 'hidden mine' strategy aims to generate up to 200 million pounds of copper annually at minimal capital expenditures, making FCX one of the most effective players in the current high-price environment.  

BHP and Regional Consolidation

The Australian giant BHP also positions copper as a main growth pillar. In its report for the first quarter of fiscal year 2026, BHP showed a 4% increase in copper production, mainly due to record performance at the concentrator in the Escondida mine (the largest in the world), which achieved the highest extraction level in 17 years (1,305 kt). BHP aims to build a dominant position in South Australia (South Australia Copper Province), integrating acquired OZ Minerals assets with existing Olympic Dam operations to enable logistical synergies and cost optimisation.  

New Demand Vectors: AI, Data Centres and Robotics

The traditional copper demand model, based on construction (40%−50% in China), is undergoing rapid erosion in favour of high-tech sectors. In 2026, analysts point to four key vectors that are changing the market's profile.  

AI Revolution and Power Density

Artificial intelligence is the most dynamic demand driver. Global energy consumption by data centres is expected to grow from 460 TWh in 2022 to over 1,050 TWh in 2026, driven almost exclusively by AI-related workloads. S&P Global estimates copper demand from data centres will rise from 1.1 million tonnes in 2025 to 2.5 million tonnes in 2040.  

The key aspect here is copper consumption intensity:

• Power Distribution Systems: Responsible for 50%−60% of total copper content in a data centre.  

• Cooling Infrastructure: Modern liquid cooling systems (required by high-power AI processors) use significantly more copper than traditional climate control units.  

• Cabling and Hardware: Computer hardware and busbars account for another 25% of demand.  

  
  

  
  

Modernisation of Power Grids

Without massive expansion of transmission grids, energy transformation will be halted. In 2026, copper becomes a critical bottleneck for global investment in energy infrastructure. It is estimated that grid modernisation will account for over 60% of copper demand growth by 2030. Every kilometre of high-voltage lines requires 10 to 20 tonnes of copper, and distribution transformers require another 30−50 kg per unit. In China, the State Grid Corporation announced an investment plan exceeding 650 billion yuan (90 billion USD) for 2025/2026, focusing on connecting remote wind and solar farms with industrial centres in the east of the country.  

Defence Sector and New Threats

Increasing geopolitical tensions have translated into a surge in defence spending. Global defence spending may double to 6 trillion USD by 2040. Copper is an essential component of ammunition, guidance electronics, communication systems, and armour. Additionally, the development of humanoid robotics (with a target of 1 billion robots by 2040) could generate annual copper demand of 1.6 million tonnes, representing 6% of current global demand.  

The table below presents a summary of copper consumption intensity in key transformational technologies.

Copper Geopolitics: Tariffs, Trump and "Siphoning Effect"

In 2026, the copper market became an arena of a new form of trade war. The administration of Donald Trump, aiming to protect and develop domestic mining and processing industries, introduced a number of uncertainties dominating price-setting mechanisms.  

Effect of Metal Siphoning into the USA (Siphoning Effect)

The announcement of import duties on refined copper (cathodes) led to a massive price premium on copper listed on the Comex exchange in New York compared to LME in London. In July 2025, this spread reached a record level of 1.30 USD per pound (2,860 USD per tonne). This 'siphoning' of metal into the USA caused Comex stocks to quintuple within a year, while the rest of the world (especially Europe and Asia) grappled with a physical shortage of goods.  

Although Trump ultimately exempted cathodes and high-quality scrap from immediate duties in July 2025, the deadline of 30 June 2026 looms, when the US Secretary of Commerce is to present a report recommending further actions. The baseline scenario assumes the introduction of a 15% duty from January 2027, forcing global players to continue stockpiling in the US 'just in case', keeping global prices on the LME elevated due to limited liquidity.  

China: Transition from Extensive to Strategic Growth

China, consuming over 50% of the world's copper, is changing its strategy. Although the real estate sector remains weak, Beijing invests in dominating the EV and renewable energy sectors, allowing it to maintain high demand for refined copper despite a decline in net imports (thanks to increased domestic smelting based on imported concentrates). However, Chinese smelters have announced a 10% production cut for 2026 due to extremely low processing fees (TC/RC), which for 2026 have been set at near zero (benchmark 0 USD/t and 0 cents/lb). This unprecedented phenomenon indicates a complete lack of availability of copper concentrate on the open market, which in 2026 will translate into declining refined metal supply from China, further boosting spot prices.  

Recycling and Substitution: Technological and Economic Barriers

High copper prices (above 12,000 USD/t) naturally prompt the industry to seek alternatives. However, in 2026 it turns out that substituting copper is not as simple as simplified economic models suggest.  

Aluminium Barrier

The primary substitute for copper in power engineering remains aluminium. The copper-to-aluminium price ratio reached 4.5:1 in 2026 (historical average is 3.5:1−3.8:1). According to analyses by BHP and Goldman Sachs, only a permanent ratio above 4.0 begins to realistically stimulate engineering processes aimed at material change.  

Nevertheless, aluminium faces constraints:

• Spatial Requirements: Aluminium wires must be about 1.6 times thicker to conduct the same current as copper ones, excluding them from tight spaces in modern electronics and smaller EV motors.  

• Air Conditioning (HVAC): In this sector, substitution progresses the fastest; Daikin plans to halve copper consumption by 2025/2026, replacing it with aluminium in heat exchangers, which at current prices is a twice cheaper solution.  

• Durability: Copper exhibits significantly better resistance to corrosion in saline and extreme environments, making it the irreplaceable material in offshore wind farms.  

Growing Role of Scrap (Secondary Supply)

Copper scrap becomes a key element of the market balance in 2026. High prices have made 'urban mining' highly profitable. In 2025, scrap-based production increased by 5.4%, and this trend is likely to accelerate in 2026. In the USA, the copper scrap market is valued at over 713 million USD and is growing at a rate of 5.3% annually, supported by federal grants for expanding national recycling infrastructure to secure 'green' raw material for battery and turbine manufacturers. However, even aggressive recycling growth can only meet about 30%−35% of total demand by 2040, which does not relieve the pressure on opening new mines.  

Corporate Analysis: Copper Giants' Strategies for 2026

Market conditions have forced major mining companies to change priorities. Instead of risky investments in new regions, leaders focus on mergers, acquisitions, and technological optimisation.  

Glencore and Rio Tinto Merger: A New Giant Worth 207 Billion USD

The most significant corporate event at the beginning of 2026 is the advanced negotiations for the merger of Glencore and Rio Tinto. Such a mega-merger would create an entity controlling a significant portion of global supply not only of copper but also of metallurgical coal and iron ore. The strategic rationale for this merger stems from the need to possess the scale to negotiate with China and finance gigantic infrastructure projects required in the new mining era.  

Codelco and State Challenges

Despite its status as the largest producer, Chilean Codelco faces high debt and the necessity to modernise aging mines. In 2026, the company focuses on the Rajo Inca project (converting Salvador mine from underground to open-pit), which aims to extend operation life by 40 years. Codelco also serves as a proving ground for automation and digitalisation – the introduction of autonomous haulers and remote operation is intended to help reduce operational costs, rising in Chile due to higher energy and water prices.  

"Value over Volume" Strategy

Most companies, including BHP and Rio Tinto, demonstrate rigorous capital discipline. Instead of building new mines from scratch, the priority is on 'brownfield expansions' (expansion of existing mines), offering faster return on investment and lower operational risk. An example is the Escondida mine, where BHP optimises concentrator capacity to maintain production at 1.2 million tonnes annually despite declining copper grade in ore.  

Macroeconomic and Financial Risks in 2026

Despite strong fundamentals, copper in 2026 remains hostage to global monetary policy and capital market sentiment.

Interest Rates and the US Dollar

The market prices in further interest rate cuts by the US Federal Reserve in 2026 (a total of about 50 basis points). Lower interest rates traditionally weaken the dollar, making copper cheaper for buyers using other currencies and stimulating demand in emerging economies. However, J.P. Morgan warns of a 35% probability of a global recession in 2026, which could lead to a sudden cooling of industrial demand and rapid liquidation of long positions by speculative funds.  

"Sticky Inflation" and Operating Costs

Inflation in 2026, although lower than in previous years, remains 'sticky' around 3%. For mining companies, this means lasting increases in labour, energy, and consumables costs. The marginal cost of copper production has shifted upwards, suggesting that prices below 9,000 USD are currently unrealistic as they would lead to the immediate closure of less profitable mines.  

Conclusions and Synthesis: Is 2026 the Beginning of a Copper Supercycle?

Analysis of gathered research suggests that 2026 is the moment when the copper market finally moves from transitional volatility to the phase of sustained structural shortage. All key factors – from natural disasters in mines, through the AI revolution, to aggressive US trade policy – converge, creating the foundations for sustained high valuations of the commodity.  

Key Conclusions for Decision Makers and Investors

1. Deficit is a fact, not a hypothesis: Even with optimistic assumptions concerning new projects in Chile and Grasberg's return to work, the refined copper market in 2026 is likely to register a deficit of approximately 300,000 tonnes.  

2. AI is the new oil for copper: Demand from data centres and digital infrastructure becomes the market stabiliser, which will sustain prices even amid weakness in traditional industrial sectors.  

3. Regional stock fragmentation as a systemic risk: US tariff policy has led to market fragmentation. Investors must consider not only the global LME price but primarily local physical premiums, which in 2026 become the main cost determinant for the industry.  

4. Copper as a national security instrument: Recognising copper as a critical raw material by the USA and EU means governments will increasingly intervene in the market by accumulating strategic reserves, creating a permanent 'floor' for prices, preventing them from falling below production costs.  

The outlook for 2026 remains thus asymmetrically oriented upwards. While short-term corrections are inevitable, the long-term trend indicates that copper will become one of the most expensive and coveted elements of the modern global economy. Without a radical acceleration of investment in mining and recycling, copper might become a 'bottleneck', slowing not only the energy transition but also the global race for dominance in artificial intelligence.