The copper market is undergoing a fundamental shift from a demand-driven dynamic to a supply liquidity crisis, according to Deutsche Bank analysis. With global copper inventories at historic lows, the market is increasingly characterized by competition among buyers to secure a limited pool of spot supply rather than traditional demand growth patterns. Deutsche Bank analyst Daniel Ghali projects copper prices will reach $22,050 per metric ton by the second quarter of 2027, representing a surge of more than 50% above current levels.
Ghali characterizes the current environment as a "historic scramble for metal" and warns that the supply squeeze could intensify if stockpiling continues at its present pace. Under such a scenario, copper supply available to global users outside major stockpiling nations could be exhausted by late 2028. The market faces multiple simultaneous pressures including continued U.S. government stockpiling, restocking demand, significant disruptions to refined copper supply, and an unexpectedly tight global supply-demand balance.
The distribution of copper inventories across regions is creating particular strain, as Deutsche Bank estimates that U.S. and major Asian consumer market inventories could account for 71% of total global supply by year-end if current trends persist. China has been accumulating strategic copper reserves for decades, while the threat of U.S. tariffs on copper imports is encouraging additional metal to move into American warehouses. This concentration leaves considerably less spot supply available to consumers in other regions.
Even if the United States ultimately decides against imposing copper tariffs, the structural dynamics of the market may prevent accumulated metal from returning to the global market. U.S. copper futures currently trade at a premium to the London Metal Exchange (LME), and copper that has entered the U.S. storage system could continue circulating between American locations rather than flowing back to other markets. The shortage of sulfuric acid, a critical input in copper extraction and refining operations, has emerged as an underappreciated constraint on supply.
Nearly half of the world's seaborne sulfur supply originates from the Middle East, and disruptions around the Strait of Hormuz have significantly tightened availability. Chile, which ranks as the world's largest copper producer, reported its weakest second-quarter output in at least 19 years and has cut its full-year production forecast for a second consecutive quarter, now expecting output to decline by 2.6%. The International Copper Study Group expects global mine supply to grow only 1.6% this year.
Current copper prices remain insufficient to trigger large-scale substitution with alternative materials such as aluminium, despite the latter's cost advantages. Deutsche Bank notes that until prices reach levels that materially change end-user behavior, the market will likely remain constrained between dwindling inventories and competition for remaining spot supply, continuing to support elevated copper prices. Copper demand has accelerated sharply, driven by structural trends including electrification, artificial intelligence deployment, defense spending, and urbanization across emerging markets.
Supply constraints combined with rigid long-term demand patterns could push baseline market-clearing prices significantly higher. Current market conditions resemble the early stages of previous multi-year commodity cycles, according to Deutsche Bank's assessment. Jefferies analysts have reinforced views that mine output remains tightly constrained, noting that risks to overall supply remain firmly skewed to the downside despite some major operations ramping up production.
Source: The Economic Times, article by Veer Sharma, ETMarkets.com
Source: economictimes.indiatimes.com