Copper Prices Approach Record Highs

Copper prices, essential for a wide range of industries, are soaring. Demand from data centers and other sectors is rapidly growing amid the spread of artificial intelligence (AI), but an accident at one of the world’s largest mines has also stalled new mine operations, leading to a growing supply shortage. The US government has designated copper a “critical mineral.” Speculative capital has flowed into the futures market, pushing prices close to all-time highs.

Three-month futures on the London Metal Exchange (LME), an international benchmark for copper, reached $10,820.50 per ton as of October 13th. This is close to the all-time high of $11,104.50 reached in May 2024, driven by an influx of speculative capital betting on growing data center demand.

On September 8th, a landslide struck the Grasberg copper mine in Indonesia, the world’s largest copper mine. Freeport-McMoRan, the US mining giant involved in operating the mine, declared force majeure on September 24th, exempting it from its contractual supply obligations. The company also stated that production at its Indonesian subsidiary is likely to decrease by approximately 35% in 2026.

The production restrictions at the Grasberg copper mine, the world’s second-largest copper mine, have had a significant impact on copper supply. Futures prices have risen 8.5% from their closing price on September 23, the day before force majeure was declared.

Citigroup adjusted its global copper mine supply forecast following the accident. It now projects a 0.1% year-on-year increase to 23.15 million tons in 2025 and a 1.3% year-on-year increase to 23.46 million tons in 2026. This represents a downward revision from its previous forecasts of 0.4% and 1.8% increases in 2025 and 2026, respectively.

On the other hand, copper consumption will continue to expand in the medium to long term. Renewable energy facilities such as wind power plants use copper wiring, and data center transmission grids also require copper.

Citigroup believes that copper consumption will increase by 2.9% year-on-year in 2026, driven by demand from data centers and other sectors, resulting in a supply gap of 400,000 tons. Compared to pre-accident estimates, the shortfall has widened by 100,000 tons. The company predicts that copper prices will reach $12,000 per ton by the first half of 2026.

Expectations of tight supply and demand are driving speculative funds, such as funds, into the copper market. Looking at LME fund positions (unsettled balances), net long positions (long minus short positions) reached approximately 56,000 lots on the 3rd, the highest level in about six months. Kazutomo Nomura, a director at Mizuho Bank, stated, “While ore shortages were already recognized, the declaration of force majeure in late September heightened concerns about supply and demand constraints.”

Efforts to secure copper, which has become increasingly scarce, are intensifying. Symbolically, the US government’s actions are significant. In late August, the US government released a draft bill designating copper as a “critical mineral.” The US government regularly updates the critical minerals list. Designation as a critical mineral makes it easier for companies to receive subsidies and simplifies the review of production licenses.

The United States is currently planning to develop the Resolution Copper Mine in Arizona, potentially becoming the country’s largest copper mine, but some residents continue to oppose the land development. In August, US President Trump addressed the stalled development of the Resolution Copper Mine on his social media platform, emphasizing, “Now is the time to need copper,” heightening interest in domestic copper production.

Of course, developing a copper mine takes more than 10 years, making it difficult to quickly achieve production to meet demand. Naohiro Niimura, co-president of Market Risk Advisory, noted, “Mining companies are more inclined to acquire companies rather than develop new mines to meet immediate demand.”

Recently, in early September, Anglo American, a major British resource company, announced a merger with its Canadian counterpart, Teck Resources.

Mine development has been temporarily stalled due to the impact of the COVID-19 pandemic and other factors. A copper industry insider stated, “There will be very few new mines starting operations until around 2028, and we are currently at the bottom.” While mergers and acquisitions (M&A) are becoming increasingly active, the start-up of new mines is unlikely, and there is a high probability that supply and demand tensions will persist. The current peak may just be a midpoint in the upward trend.

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