Strong Dollar Weighs on Copper Prices as Rate Cut Hopes Grow

Last week saw the price of copper drop slightly, pressured by increasing expectations of a reduction in interest rates by the Federal Reserve and a firmer dollar. On the London Metal Exchange, three-month copper hit $10,780.50 per metric ton, representing a 0.2% increase. 

According to CME FedWatch, markets now price a 78% chance of a 25-basis point reduction in rates this month. This is quite an increase from the 41% probability recorded a week earlier. 

The red metal’s prices are expected to increase in 2026, pointing to ongoing supply challenges caused by repeated mine disruptions and long-term demand from clean-energy spending and electrification. A recent note from UBS shows that the bank increased its Q1 prediction for 2026 to $11,500 per metric ton of copper, a $750 increase. 

Its price predictions for Q2 and Q3 2026 were also increased by $1,000 to reach $12,000 and $12,500 per metric ton respectively. For Q4, the bank set its forecast for next year to $13,000 per metric ton. 

In addition to this, UBS also boosted its forecasted market deficit significantly, reaching 407,000 tons come next year. This is quite an increase from the previous projection of 87,000 tons and reflects persistent supply risks and shrinking inventories. In its note, the bank cited multiple disruptions experienced this year, including protests in Peru, delayed production rebound in Chile, and issues at the Grasberg mine in Indonesia. 

All these issues, it noted, point to long-lasting structural supply limitations. Freeport-McMoRan, which operates the Grasberg mine, recently announced its plans to restart production at Grasberg by Q3 of 2026. This comes after a fatal incident led to the operations stalling at the mine for some time. 

The bank also trimmed its growth expectations for refined copper production to 2.2% for next year, citing ongoing operational challenges and falling ore grades. 

Meanwhile, global demand for the red metal is projected to increase by 2.8% in 2025 and next year, driven by the growth of data centers, upgrades to power grids globally and the continued adoption of renewable energy as well as electric vehicles. 

The Swiss Bank believes any near-term price dips will likely be short-lived and recommends employing volatility-selling strategies or maintaining long positions. 

China, as the largest consumer of copper globally, continues to play a pivotal role in determining global price trends. Any shifts in its industrial output or property sector activity may significantly influence demand. 

The tightening supply of copper on the global market puts exploration companies like Torr Metals Inc. (TSX.V: TMET) in a good position to attract investment in support of their programs geared at addressing the deficits predicted over the medium and long term. 

NOTE TO INVESTORS: The latest news and updates relating to Torr Metals Inc. (TSX.V: TMET) are available in the company’s newsroom at https://ibn.fm/TMET 

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