This past week saw the price of copper climb to around $13,800 a ton, supported by easing oil prices after renewed hopes of U.S.-Iran negotiations and fresh U.S. tariff proposals targeting downstream copper products. However, Macquarie Strategy believes the recent rally is no longer supported by underlying market fundamentals.
In its latest commodities report, the bank argues that investor optimism has outpaced physical market conditions. Rather than reflecting a genuine shortage of copper, the recent price gains have been driven largely by speculative positioning, short covering and trade flows linked to anticipated U.S. trade measures.
Macquarie notes that the global copper market remains well supplied. Since 2025 began, visible inventories have increased by over 870,000 tons, with stocks on the London Metal Exchange reaching their highest level in years and Comex inventories climbing to record levels. The bank also estimates that over 500,000 tons of copper is being held off-exchange in the United States.
The report says tariff-related arbitrage between U.S. and international exchanges has redirected significant volumes of copper into the U.S., creating the appearance of tighter supply elsewhere. However, this reflects changing trade flows rather than a genuine shortage of metal.
Demand, meanwhile, is showing signs of weakening. Chinese buyers have reduced purchases in response to elevated prices, resulting in an unusually large seasonal inventory build. Outside China, physical demand also remains soft, with spot premiums trading below annual contract levels.
Mine production continues to face operational challenges, with output guidance from major producers revised lower following disruptions at the Kamoa-Kakula and Grasberg mines. Even so, Macquarie expects global mine supply to grow by 4.4% next year, assuming Cobre Panama will resume production during Q2 of 2027.
In addition, the bank has trimmed this year’s global copper demand growth forecast, citing slower consumption in China as the country’s struggling property sector continues to weigh on demand. Although demand outside China is expected to improve, it is unlikely to fully offset the slowdown in the world’s largest copper consumer.
Macquarie is also cautious about expectations that AI will rapidly boost copper consumption. While data centers are expected to increase long-term demand, project delays, grid constraints, and equipment shortages could limit near-term copper requirements.
Despite its cautious short-term outlook, the bank remains optimistic over the longer term as electrification and the energy transition continue to support demand growth. However, it estimates that the copper market will remain in surplus, forecasting a more than 260,000-ton surplus for the year and even larger surpluses through 2028.
Although Macquarie has raised this year’s average copper price forecast to $13,165 a ton, it expects prices to eventually retreat as market fundamentals reassert themselves, with a projected floor of around $11,000 a ton by Q3 of 2027.
It remains to be seen how the current drivers of physical copper prices affect the operations and funding available to exploration firms like Collective Mining Ltd. (NYSE American: CNL) (TSX: CNL) over the coming quarters and years.
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