Copper’s Momentum: Key Catalysts to Watch in 2026

Theme and Background

This chapter focuses on the historic breakthrough in the copper market in 2025, analyzing the structural supply-side pressures, changes in the geographical distribution of inventories, and the strengthening of demand persistence behind the record-breaking surge in copper prices. The report argues that this is not a typical cyclical rally but a non-cyclical revaluation of the market against a backdrop of tightening supply-demand fundamentals.

Core Thesis

The author's core judgment is that the copper market is undergoing a non-cyclical revaluation driven by supply shocks, with an intensity far exceeding that of traditional cycles. The counterintuitive aspect lies in the fact that, although global visible inventory data does not appear extreme, the fragmentation of inventory geography and policy uncertainty have made actual supply outside the United States tighter than surface data suggests. This "regional inventory pool" effect amplifies the impact of supply-demand imbalances.

Key Arguments and Data

1. Price Performance: Copper prices rose by 43.93% in 2025, reaching a record high of $13,273.81 per metric ton as of the report's writing.

2. Supply Shocks: A series of major production outages occurred simultaneously, forcing the market to reprice prematurely:

• The Grasberg mine (the world's third-largest copper mine) was shut down in September due to a mud slurry inundation, with production losses through December 2026 expected to exceed Collahuasi's full-year output (approximately 800,000 tons).
• Kamoa-Kakula experienced production cuts of roughly 300,000 tons due to flooding.
• Teck lowered multiple operational guidance, totaling approximately 60,000 tons.
• Codelco's El Teniente mine saw a production cut of 33,000 tons due to an accident.
• Cobre Panama remains shut down, with losses exceeding 300,000 tons.

3. Collapse in Treatment Charges (TCs): This is a clear signal of extreme upstream supply tightness:

• The 2026 annual TC benchmark fell from $21.25/ton in 2025 to $0/ton (historical normal levels are often above $80/ton).
• Spot TCs have entered negative territory, hitting historic lows.

4. Structural Changes in Inventories: Trade frictions and policy uncertainty have altered inventory behavior. US inventories are high, but inventories outside the US are tighter than global visible data suggests.

Historical Comparison Data:

Metric	1 Month	3 Months	1 Year	3 Years	5 Years
Copper Spot Price	10.86%	21.79%	43.93%	14.19%	9.95%
Copper Miners Index	16.49%	26.28%	74.59%	28.53%	18.76%
Junior Copper Miners Index	16.17%	34.77%	132.42%	43.42%	26.45%
Commodity Index	-0.65%	4.84%	11.07%	-0.93%	7.04%
S&P 500 Index	0.06%	2.65%	17.88%	22.98%	14.42%

Companies/Assets Involved

• Grasberg Mine (Freeport-McMoRan): A key source of supply shock; the shutdown removed the world's third-largest copper mine from the market.
• Kamoa-Kakula (Ivanhoe Mines): Flooding led to production cuts of approximately 300,000 tons.
• Teck Resources: Multiple guidance downgrades, totaling roughly 60,000 tons in production cuts.
• Codelco (El Teniente): An accident caused a production cut of 33,000 tons.
• Cobre Panama (First Quantum Minerals): Ongoing shutdown, with losses exceeding 300,000 tons.
• Junior Copper Miner (Unnamed): The report mentions a junior developer with a direct equity relationship with the US government, benefiting from policy support (expedited permitting).

Investment Implications

1. Go Long on Copper Mining Stocks: Copper miners (+74.59%) and junior copper miners (+132.42%) significantly outperformed the copper price itself in 2025, demonstrating a pronounced operational leverage effect. Junior miners also benefit from an increased probability of projects transitioning from "option value" to "execution value."

2. Focus on US-Related Projects: The US government, through expedited permitting and direct equity support, has enhanced the certainty of domestic copper project development. Related junior developers warrant attention.

3. Beware of Smelter Margin Pressure: TCs falling to zero or turning negative indicate pressure on smelter profits, but upstream miners' bargaining power is strengthening. Investors should prioritize allocating to miners over smelters.

4. Geographic Inventory Risk: Tight inventories outside the US, combined with Section 232 tariff risks, provide continued upside support for copper prices in 2026. Investors need to focus on regional inventory data rather than global aggregates.

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Theme and Background

This chapter focuses on the structural drivers of the copper market in 2026, with a particular emphasis on how the US Section 232 tariff risk, de-dollarization trends, and the shift in demand structure toward strategic sectors collectively support copper prices. The report argues that these factors are reshaping the pricing logic of copper, transforming it from a traditional economic cycle indicator into a key materials asset.

Core Thesis

The author's core judgment is that the copper market is undergoing a non-cyclical revaluation, with its pricing foundation shifting from the traditional industrial cycle to strategic demand and supply constraints. The counterintuitive point is that, despite the market's general expectation that tariff risks have been resolved, the report argues that Section 232 risks have not disappeared but are instead evolving and continuing to fragment the inventory system. At the same time, copper has decoupled from the Chinese stock market, with which it historically had a high correlation, indicating a fundamental shift in demand drivers.

Key Arguments and Data

1. Persistent Section 232 Tariff Risk

• The Section 232 copper proclamation issued on July 30, 2025, imposed a 50% universal tariff on semi-finished copper and copper-intensive derivative products, but refined copper was exempted.
• The market had previously priced in nearly 50% of the tariff into refined copper prices. Following the exemption, the US copper premium fell from historical highs, but inventories remain concentrated in the US (COMEX).
• On June 30, 2026, the US Secretary of Commerce will submit an updated report on the domestic copper market to the President to determine whether to impose a tiered tariff on refined copper: 15% effective January 1, 2027, rising to 30% effective January 1, 2028.
• If the Supreme Court restricts broader tariff strategies, the Trump administration may become more reliant on Section 232 tariffs.

2. De-dollarization Supports the Metals Sector

• Federal Reserve Chairman Jerome Powell faces criminal investigations and political pressure, intensifying market concerns over Fed independence and reinforcing the de-dollarization trend.
• The metals sector overall performed strongly in 2025 (see Figure 5), with de-dollarization serving as a credible tailwind, particularly benefiting key materials such as copper.

3. Demand Structure Shifts Toward Strategic, Low Price-Sensitive Areas

• Copper has decoupled from the Chinese stock market (MXCN Index), with which it historically had the highest correlation, since 2021 (see Figure 6), indicating a change in pricing logic.
• Three major demand expansion areas are advancing simultaneously:
• AI and Data Centers: Driving a surge in electricity consumption, boosting demand for copper-intensive power systems, cooling, and connection networks.
• Defense Spending: Creating a more persistent demand layer with lower correlation to the economic cycle.
• Grid Modernization: Entering a long-term renewal cycle driven by load growth, aging infrastructure, and reliability concerns.
• Electrical infrastructure has surpassed construction as the largest source of copper demand, rising from 24% of total demand in 2020 to 30% in 2025, with further growth expected (see Figure 7).

4. Key Catalysts for 2026

• Policy Milestone: The Section 232 assessment report on June 30, 2026.
• Supply Side: Limited supply chain flexibility means any disruption will quickly tighten the market, supporting a higher "critical premium."

Companies/Assets Involved

This chapter does not mention specific companies, focusing instead on macro policy, demand structure, and market dynamics. The asset classes involved include:

• Copper: The core subject of analysis, LME copper spot price.
• Other Metals: Gold, silver, platinum, palladium, lithium, nickel, uranium (U3O8), used as comparative references (see Figure 5).
• Chinese Stock Market: The MXCN Index, used to illustrate copper's decoupling from its historical correlation (see Figure 6).

Investment Implications

1. Long Copper: Supply constraints combined with strategic demand (AI, defense, grid) keep upward pressure on copper prices in 2026. Tariff risks have not been resolved and may instead exacerbate spot tightness by fragmenting the inventory system.

2. Monitor US Copper Premium: Under the Section 232 framework, if tariffs on refined copper are implemented in 2027, they will push up US copper prices. Current inventory concentration in the US (COMEX) already reflects this expectation.

3. Beware of De-dollarization Support for Metals: Impaired Fed independence and expectations of lower interest rates will continue to benefit key materials assets like copper, especially when these factors resonate with supply tightness.

4. Avoid Traditional Cyclical Logic: Copper has decoupled from the Chinese stock market. Investors should no longer judge copper price trends using traditional economic cycle indicators (e.g., Chinese real estate) but should instead focus on structural demand from electrical infrastructure, AI, and defense.

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Theme and Background

This chapter focuses on the fundamental shift in copper demand structure and how mining capital allocation trends jointly support copper prices remaining at historically high levels. The report argues that the marginal demand drivers are transitioning from traditional cyclical sectors to harder-to-delay critical end uses, while mining M&A activity is accelerating, further reinforcing the strategic value of copper assets.

Core Thesis

The author's core judgment is that after copper prices hit record highs in 2025, they can remain near record levels in 2026. This judgment is based on three mutually reinforcing factors: a more durable demand structure, constrained supply response, and mining giants' continued tilt toward copper through M&A. The contrarian view lies in the market's widespread concern that high copper prices will suppress demand, but the report argues that current demand drivers (power grids, AI, defense) have greater rigidity and lower price elasticity.

Key Arguments and Data

• Demand Structure Shift: Marginal demand drivers are shifting from deferrable cyclical sectors such as real estate and home appliances to grid modernization, AI power infrastructure, and strategic industrial priorities. These areas feature long investment cycles and high policy priority, making demand harder to postpone.
• Supply-Side Constraints: Upstream mine closures and a sharp drop in smelting treatment charges continue to limit supply response capacity, amplifying the price impact of structural changes on the demand side.
• Rising M&A Activity: The market has publicly discussed deals that could surpass the multi-billion-dollar Anglo-Teck merger in 2025 (e.g., confirmed merger talks between Rio Tinto and Glencore). M&A premiums reflect mining giants' increased valuation of long-term copper exposure and boost sentiment across the copper sector.

Catalyst	Specific Manifestation	Impact on Copper Prices
Demand Structure	Power grids, AI, defense become marginal drivers	Demand becomes more rigid, price elasticity decreases
Supply Response	Mine closures, sharp drop in treatment charges	Supply cannot quickly keep pace with demand changes
Capital Allocation	Large-scale M&A (e.g., potential Rio Tinto-Glencore merger)	Reinforces copper's strategic asset status, supports sector valuation

Companies/Assets Involved

• Rio Tinto and Glencore: The two companies have confirmed merger talks; if concluded, it would surpass the 2025 Anglo-Teck merger to become one of the largest deals in mining history. The report views this as a landmark event signaling mining capital's tilt toward copper.
• Anglo American and Teck Resources: The 2025 merger is used as a benchmark for comparison, showing that the scale of copper M&A is escalating.
• Copper Miners Overall: The report does not name specific companies but notes that large miners are consistently shifting their portfolios toward copper, which helps sustain market confidence in the entire copper sector.

Investment Implications

• Long Copper Prices and Related Assets: The report believes copper prices can remain near historical highs in 2026. Investors should focus on copper mining stocks (especially junior miners with operational leverage and project execution capabilities) as well as copper futures/ETFs.
• Focus on M&A Theme: Mining giants' competition for copper assets will continue to drive up valuations of high-quality copper projects. Companies holding copper resources may become M&A targets, offering premium returns.
• Beware of Policy Risks: The report notes that "policy risks remain active" (e.g., US Section 232 tariffs). Investors should monitor the potential impact of geopolitical and trade policies on the copper supply chain.