Copper Price Surge Linked to Deteriorating Global Mine Production
Copper prices have reached a record high in recent weeks, surpassing $14,779 a ton on the London Metal Exchange (LME) and $3.74 a pound in New York futures.
The metal's price has increased by around 24% this year and approximately 51% over the past 12 months, outperforming the Mag 7 stocks.
While tariffs have been cited as a possible explanation for the surge in copper prices, traders are now facing a flat premium on New York futures compared to London, which doesn't match the expected tariff impact.
The real reason behind the price increase lies in deteriorating global mine production, with the International Copper Study Group (ICSG) reporting a 1.1% decline in the first half of this year.
Chile's output dropped significantly, contributing to the overall decrease in global supply.
Morgan Stanley has revised its mine supply forecast, now expecting production to be flat or slightly lower, marking the first annual decline since 2017.
The copper industry faces a generational problem due to declining ore grades and increasing drilling depths.
Average permitting times have also risen, making it difficult for new projects to come online.
The industry has found fewer large deposits in recent years, with the cost of exploration increasing exponentially.
Meanwhile, demand for copper continues to rise due to growth in industries such as artificial intelligence and renewable energy.