Market News

BY Mark Burton and James Attwood

(Bloomberg) -- Copper prices topped $12,000 a ton for the first time, extending the metal’s recent bull run as mine outages add to concerns about supply of the vital industrial metal.

Benchmark prices climbed as much as 2% on the London Metal Exchange on Tuesday to $12,159.50. The metal has gained more than 35% this year and is on track for its biggest annual jump since 2009.

The threat of US import tariffs on the metal has also been an important factor pushing up prices this year. Copper is piling up in American warehouses as the potential imposition of new levies prompts buyers to secure shipments and has opened up an arbitration trade.

“The US is still in stock-building mode, and I would expect that to continue until we get further information from the US government,” said Helen Amos, a commodities analyst at BMO Capital Markets Ltd.

Supply risks, which loomed large for years, started to come to the forefront in recent months as a key driver of the market. A deadly accident at the world’s second-largest copper mine in Indonesia, an underground flood in the Democratic Republic of Congo and a fatal rock blast at a mine in Chile have combined to crimp global production.

At the same time, demand prospects remains robust due to long-term trends towards electrification, with massive quantities of the metal required to build out power grids, new energy infrastructure and manufacturing. Investors are also betting copper consumption will surge further to feed the growing power needs of the artificial intelligence industry.

Industry analysts have said that much of the richest and most easily accessible mining resources are now exhausted, and some have expressed concern about where the new supply will come from in the next decade and beyond to meet the forecast growth in consumption.

All told, experts are warning that the market is on the cusp of a major deficit.

A number of mining companies this year have lowered their production guidance. Deutsche Bank warned that output from the world’s largest miners will drop 3% this year and could fall again in 2026.

While global inventories are sufficient for now, Morgan Stanley analysts are forecasting that the global copper market will face its most severe deficit in more than 20 years. The bank expects demand to exceed supply by about 600,000 tons next year, and sees the shortfalls worsening from there.

Citigroup has advised clients that copper could hit $15,000 in a bull-case scenario where a weakening dollar and US interest-rate cuts further boost the metal’s appeal, prompting investors to more aggressively pile in.

The rally has attracted doubters too, with Goldman Sachs analysts cautioning that surging prices so far have been driven by investor bets on future market tightness rather than today’s supply-and-demand conditions.

Global stocks of copper have actually risen, but much of that is “sterilized” in US warehouses, BMO’s Amos said. That’s thrusting manufacturers elsewhere into a bidding war to keep hold of supplies.

“Some investors are worried that stock would come out, but our view is that it stays in the US and gets eroded gradually over time,” Amos said, adding that the stockbuilding is part of a broader trend as the US gears up for greater self sufficiency.

Copper was up  to settle at $ a ton on the LME. Other industrial metals were mixed, with nickel up 3%, extending a sharp rally seen after Indonesia proposed cutting nickel ore production in 2026.

--With assistance from Yvonne Yue Li.