What's Driving Copper Markets into 2026: Supply Crunch and Price Pressure

The copper market is bracing for a challenging year ahead. While 2025 delivered volatile price swings stemming from production hiccups and robust demand, 2026 is shaping up to be defined by one dominant theme: a fundamental supply shortage that could push prices to fresh highs.

The culprit isn’t mysterious—major mines across the globe have either shuttered operations or cut production sharply. At the same time, demand keeps climbing thanks to renewable energy buildouts, data center expansion, and urbanization trends across emerging markets. The result? The International Copper Study Group forecasts a 150,000 metric ton deficit by year-end 2026, with prices potentially averaging $10,635 per metric ton.

The Supply Side is Badly Broken

The backbone of the market disruption traces back to two catastrophic incidents. In late 2025, Freeport-McMoRan’s Indonesian Grasberg operation—the world’s second-largest copper mine—faced a major setback when 800,000 metric tons of wet material flooded its primary block cave. The disaster cost seven lives and halted all production. Management now signals that full recovery won’t occur until 2027, with only a phased restart of operations beginning in mid-2026.

Simultaneously, the Democratic Republic of Congo’s Kamoa-Kakula mine, operated by Ivanhoe Mines, experienced a seismic event in May that triggered flooding and forced a production halt. Though partial operations have resumed, the company has signaled that its stockpiled reserves will deplete during the first quarter of 2026. As a result, annual output guidance has been trimmed to between 380,000 and 420,000 metric tons—well below the 500,000-540,000 metric ton run-rate expected in 2027.

Even earlier in the year, BHP’s Escondida mine—technically the world’s largest—underwent temporary shutdowns that compounded market tightness.

Relief may eventually arrive from First Quantum Minerals’ Cobre Panama operation, which was forced offline in late 2023 after Panama’s Supreme Court rescinded its mining contract. The Panamanian government ordered a lease review with the aim of restarting operations in late 2025 or early 2026. However, bringing a shuttered mine back to full capacity requires time, meaning any supply relief will likely come in waves rather than all at once.

Jacob White, the ETF product manager at Sprott Asset Management, framed the situation plainly: “Grasberg remains a significant disruption that will persist through 2026, and the situation is similar to constraints at Ivanhoe Mines’ Kamoa-Kakula. We believe these outages will keep the market in deficit in 2026.”

Demand Remains Surprisingly Resilient

On the demand side, the picture is more nuanced. The energy transition continues to drive copper consumption upward—renewable installations, AI infrastructure, and data center buildouts all depend heavily on the red metal. Furthermore, U.S. tariff uncertainty in 2025 sparked a wave of advance importing, with refined copper inflows into America jumping to levels that boosted domestic inventory to 750,000 metric tons.

However, China—historically the copper market’s heavyweight—presents a mixed picture. The property sector remains structurally impaired, with home prices forecast to decline 3.7 percent in 2025 and continue falling into 2026. Years of stimulus efforts have failed to arrest this deterioration.

Yet China’s broader economy has proven resilient. Growth of 4.9 percent is expected in 2025 and 4.8 percent in 2026, fueled primarily by high-tech exports. More importantly, the country’s five-year plan (2026-2031) prioritizes electricity grid expansion, manufacturing upgrades, renewable energy scaling, and AI-driven data center deployment. All of these are copper-intensive.

“Weakness in the property market is likely to continue in 2026, but the story for copper is constructive,” White noted. “Policy focus and capital are expected to prioritize expanding the electricity grid and upgrading manufacturing, renewables and AI-related data centers. These copper-intensive areas are set to more than compensate for a subdued property market, yielding net growth in China’s copper demand next year.”

The Long-Term Deficit Outlook

Even more concerning for market balance is that the pipeline of new supply projects remains anemic. Arizona Sonoran Copper’s Cactus project and the Rio Tinto/BHP Resolution joint venture both face years of development before contributing material volumes. Meanwhile, existing mines contend with declining ore grades—a persistent headwind that eats into output without corresponding production ramps elsewhere.

Lobo Tiggre, CEO of IndependentSpeculator.com, characterized copper as his highest-confidence trade for 2026, reasoning that demand growth will outpace new supply additions by a substantial margin. “These things are taking years to fix. We’re looking at 2027; by then, the copper demand side will have kicked up even more. My base case is actually for copper deficits to broaden in the next couple of years,” he stated.

A UN Conference on Trade and Development report from May underscores the scale of the challenge: global copper demand is projected to surge 40 percent by 2040, requiring $250 billion in investment capital and the construction of 80 new mines. Complicating matters, half the world’s copper reserves are concentrated in just five countries—Chile, Australia, Peru, the Democratic Republic of Congo, and Russia—each facing distinct geopolitical and operational constraints.

Wood Mackenzie forecasts that copper demand will climb 24 percent to 43 million metric tons annually by 2035, requiring 8 million metric tons of new mine supply and 3.5 million metric tons from scrap recycling to maintain equilibrium.

Market Mechanics and Price Implications

According to the International Copper Study Group, mine production will increase just 2.3 percent in 2026 to reach 23.86 million metric tons, while refined production grows only 0.9 percent to 28.58 million metric tons. Refined copper consumption, however, is forecast to expand 2.1 percent to 28.73 million metric tons—outpacing production and generating that projected 150,000 metric ton deficit.

Natalie Scott-Gray, senior metals demand analyst at StoneX, flagged an additional layer of complexity: regional price differentials and elevated physical premiums are likely to persist. Market participants may increasingly turn to “just-in-time” purchasing models, sourcing from bonded warehouses or directly from smelters rather than maintaining large inventory buffers.

The supply-demand math also has secondary consequences. As traditional refined copper becomes scarcer and pricier, recycled and scrap copper alternatives gain appeal. The price of copper scrap—historically a bellwether for end-user cost sensitivity—stands to become increasingly relevant as buyers seek to offset premium prices in the primary market. Some consumers may even explore substitution strategies, swapping copper for aluminum in applications where performance permits, though such switches carry their own technical and economic tradeoffs.

Scott-Gray’s price forecast of an average $10,635 per metric ton for 2026 reflects this supply-constrained backdrop. Higher prices, while supportive of mining economics, risk dampening demand among price-sensitive industrials and construction sectors.

The Verdict

The convergence of near-term mine disruptions, persistent geopolitical tensions, and structural long-term demand growth paints a bullish picture for copper in 2026. White cited low inventories, mine and concentrate deficits, and ongoing tariff uncertainties as supporting factors for higher prices throughout the year.

In a London Metal Exchange poll cited by StoneX, 40 percent of respondents identified copper as the best-performing base metal for 2026—a level of confidence that reflects the market’s expectation of sustained tightness and price appreciation. Whether prices can sustain record levels will ultimately depend on how quickly supply disruptions resolve and whether demand growth persists despite elevated costs.