Copper: Sluggish supply growth offsets risk aversion – Commerzbank

§ 01 Executive Snapshot

• What: Copper prices have decreased approximately 5% since mid-May due to rising risk aversion linked to increasing oil prices.
• Who: Commerzbank, Cochilco, Grasberg Mine, Chinese copper producers.
• Why it matters: The report highlights the impact of sluggish supply growth on copper prices amidst a backdrop of increasing global economic uncertainty.

§ 02 Key Developments

• China’s copper production in April dropped by 4.5% month-on-month, showing only a 3% increase compared to the previous year.
• Cochilco has revised down Chile’s copper production expectations for 2026, citing low ore grades and operational challenges.
• Chile's copper production forecast for this year has been adjusted down by 2%, now projected at 5.3 million tons.
• For next year, Cochilco anticipates a slight recovery in production, estimating 5.5 million tons, a 4% increase.
• The Grasberg Mine in Indonesia is not expected to reach full production capacity until the end of 2027, delaying recovery in supply.

§ 03 Strategic Context

• The current copper supply issues are compounded by operational difficulties and low ore grades, which have historically affected production rates in leading supplier countries like Chile.
• The evolving dynamics in the copper market reflect broader economic trends, including the influence of oil prices on risk sentiment among investors and industrial users of copper.

§ 04 Strategic Implications

• The immediate implication is a tightening of copper supply, which could lead to sustained price support despite risk aversion in the market.
• Long-term, the delayed recovery in production from major mines like Grasberg may affect global copper availability, impacting industries reliant on copper for manufacturing and construction.

§ 05 Risks & Constraints

• Potential risks include further operational challenges or regulatory changes in major copper-producing countries, which could exacerbate supply constraints.
• Competition from alternative materials and shifts in demand due to economic conditions could also pose risks to copper prices and production forecasts.

§ 06 Watchlist / Forward Signals

• Upcoming production reports from Chile and Indonesia will be critical in assessing the recovery trajectory of copper supply.
• Monitoring global oil prices and their impact on risk sentiment will provide insights into potential fluctuations in copper demand and pricing trends.