China Securities Co., Ltd.: The tight balance of supply and demand for copper continues, with liquidity and a weak US dollar supporting long-term premium copper prices.

China Securities Co., Ltd. Securities released a research report stating that high cost-effective conductive metal copper, deeply involved in global energy transformation and industrial development, and the supply-demand gap is tending to widen. The continuous supply gap is expected to be 100,000 tons, 290,000 tons, 480,000 tons in 2026-2028, and the forward gap is showing an expanding trend, which is conducive to pushing the copper price center higher. Considering the Federal Reserve is in a rate cut cycle, and copper's important strategic position in the global industrial chain restructuring, a weak US dollar benefits scarce copper to receive high premiums. It is estimated that the LME copper price center will gradually move up to $9,968/ton, $12,500/ton, $13,000/ton, $14,000/ton from 2025 to 2028. The core points are as follows: Copper: the tight supply-demand situation continues, and long-term copper prices steadily rise Market review: Overshooting price increase in December 2025, only remaining fluctuations in H1 2026 In the first half of 2026, global copper prices fluctuated at a high level, with a bottoming out rebound midway, but the price did not move forward, mainly due to the accelerated price increase in December 2025. At the end of November 2025, at the Asia Copper Conference, Codelco opened long-term refined copper contracts for 2026 at a premium of $330-350/ton, which got accepted. In order to ensure profit from these long contracts, moving the goods to the COMEX market with a higher LME basis became a necessary option, as investors quickly priced in the arbitrage between the US and non-US regions, causing a steep increase in LME copper prices, with a 22% increase in just one month, similar to the previous year. As the goods were moved, the COMEX-LME price spread disappeared, causing the underlying logic of moving goods to collapse, while the violent price increase triggered downstream resistance, leading to a significant accumulation of global visible inventories, with copper prices fluctuating around $13,000/ton. Middle East conflicts temporarily put pressure on copper prices to $11,700/ton, and the relatively low price stimulated active procurement downstream, helping copper prices return to around $13,000/ton. As of April 30, 2026, LME copper for March delivery closed at $13,019/ton, up 4.2%; Shanghai copper main contract closed at RMB 100,937/ton, up 2.7%. In the equity market, stock prices of both resource-based and smelting copper mining companies lagged significantly behind the non-ferrous index and the Shanghai and Shenzhen 300 Index, despite the increase in copper prices and significant release of company performance significantly boosting EPS. However, the Middle East conflict led to concerns about a recession, weighing the market sentiment down, leading to underperformance of copper targets. Copper concentrate supply and demand analysis Copper element distribution is scattered, but copper ore output is concentrated Copper is ranked 17th in terms of abundance in the earth's crust, with an average abundance of 0.007%. Copper elements mainly exist in the form of sulfide or oxide ores in rocks and oceans, and their distribution is very scattered. They need to be enriched through special geological processes to form mineable deposits. Global copper reserves are highly concentrated, with CR5 accounting for 53%, mainly distributed in Chile (18%), Australia (10%), Peru (9%), DR Congo (8%), and Russia (8%); CR10 accounted for as high as 73%. The concentration of copper ore output exceeds the concentration of reserves, with CR5 accounting for 60%, Chile (23%), DR Congo (14%), Peru (12%), China and Indonesia accounting for 8% and 3% respectively. In terms of the reserve-to-extraction ratio, the static mineable life of global copper mines is 43 years, lower than bauxite's 64 years. The top 20 copper mines in the world produced 7.883 million tons in 2025, accounting for 33.82% of global production; the top 20 copper mining companies produced 12.79 million tons in 2025, accounting for 54.9% of global production, highlighting the concentration of copper resources. Copper exploration budget expansion slows down, limited potential development projects From initial discovery to production, the process of building a new mine is long and increasingly difficult: exploration and feasibility, approval and waiting, construction and production. According to S&P Global data, the exploration and research phase is the most time-consuming stage, averaging 11.3 years, including preliminary discovery, detailed exploration, resource assessment, and feasibility studies to confirm the economic and technical feasibility of the project. The approval and waiting stage, after completing the feasibility study, the project is not immediately started, but it takes an average of 2.1 years to obtain government permits, community permissions, and make final investment decisions. With all conditions in place, the actual construction of the mine to production of products is relatively fast, averaging 2.1 years. Exploration budgets showed a mild increase in 2025, amounting to 70% of the previous cycle's peak. Exploration investment in copper mine exploration is the earliest indicator of future copper mine increment, according to S&P Global data, global copper mine exploration investment has experienced a roller coaster-like fluctuation. Starting from around $25 billion in 2010, it reached a peak of about $47 billion in 2012, then declined to a low point in 2016 due to industry downturn. Since 2016, global copper exploration budgets have rebounded, with year-on-year growth rates exceeding 20% in 2021-2022, but the growth rate slowed significantly in 2024, with exploration budgets returning to $3 billion, which is 64% of the previous peak. In 2025, global copper exploration remained mild growth, with a budget of $3.3 billion. From the perspective of exploration spending entities, large companies are in the first echelon, followed closely by small companies; from the stage of funding allocation, most of the funds are focused on feasibility studies and deep exploration after discovery, with a relatively low proportion for early exploration. There are few newly discovered mines, and the potential development projects are limited. According to the 2025 updated report from S&P Global Commodity Insights, 258 copper ore deposits discovered between 1990 and 2024 have been identified, with only 20 new discoveries in the past decade from 2014-2024, accounting for only 7.8% of the total. The 258 copper mines have a total of 1.365 billion tons of copper reserves, resources, and cumulative production, up 4% from last year, or 49 million tons. Due to the natural need for more time to develop new assets, this number may increase in the next few years, thus qualifying as major discoveries. However, recent discoveries cannot be compared in scale or quantity with those in the 1990s, meaning there are limited projects available for copper miners to develop. Multiple factors suppressing copper mine capital expenditure, expected global copper mine supply increment under pressure The difficulty of mining development and the increase in overseas interest rates have raised the return requirements for copper mining companies investing in new mines. Generally, new copper mine supply usually lags behind capital expenditure by 5 years, as seen in the quicker delivery of the Kamoa-Kakula copper mine construction that took 5 years from ground-breaking to production, starting from the mine's discovery in 2008, it took 13 years. Normally, current copper prices determine the immediate capital expenditure capacity of copper mining companies. Due to significant policy risks (such as royalties and taxes) and ESG issues (such as community opposition) in resource-rich regions in South America and Africa, as well as resistance to mining development in well-established systems of North America, mining companies usually need financing for development. In the 5 years of mine design and construction, the project only incurs costs, as overseas benchmark interest rates rise, mining company funding costs increase accordingly. Mining development faces uncertainty in both policy and financing abroad, thus raising the return requirements for new mining investments. This means that most new copper mines will require higher copper prices to stimulate more effective new supply. The average copper price in the LME was $9,294, $8,786, $8,525, $9,269, $9,968 per ton from 2021 to 2025, significantly higher than the $7,500-$8,800 per ton corresponding to the high Capex in the previous 2010-2013 cycle. However, from 2021-2025, global major copper mines did not show a significant acceleration in Capex, with an estimated Capex of around $93.2 billion in 2025, at 84% of the peak value of $110.9 billion in 2013, indicating limited growth in global copper mine supply over the following 5 years. The fragility of copper mine supply is evident, with an expected supply increase of less than 600,000 tons during 2026-2028 Global major mines output dropped by 60,000 tons in Q1 2026. Major copper mining companies have successively released operating data for the first quarter of 2025 and 2026 (excluding Chile's National Copper Corporation). In 2025, the total production of 14 copper mining companies was 12.6 million tons, a decrease of 135,100 tons year-on-year. Of these, the noticeable reductions came from Freeport, Glencore, and Anglo-American Resources. Freeport's production was interrupted by Indonesian smelting closures and pending approval for copper ore exports, and later suffered from underground mudslides interrupting production. Glencore's reduction was due to a decrease in the ore recovery rate, ore grade, and overall recovery rate at Collahuasi, Antapaccay, and KCC. Anglo-American Resources faced quantity decreases due to ore grade and beneficiation maintenance issues at Chilean mines. The significant increases were from Rio Tinto and MMG, benefiting from the volume increase at Oyu Tolgoi Underground and Las Bambas mines. In Q1 2026, Freeport experienced a more pronounced reduction due to a mudslide suspension, production recovery falling short of expectations, and after several months of suspension, an increase in the proportion of wet ores underground requiring the overhaul of the ore transport system. Looking at the global leading mining companies in terms of output realization, the copper supply faces uncertainties and fragility. An expected slight increase in copper mine production in 2026, with average annual increments locked below 600,000 tons in 2027-2028. Total copper mine production of major mines globally is expected to have a slight increase in 2026, mostly influenced by the reduced output of Grasberg, Mirador, and Kamoa-Kakula mines from the downgraded newly increased production. Grasberg was impacted by Indonesian domestic smelting capacity closures and limited copper ore export approvals, along with underground mudslides interrupting production; Mirador's phase two project was completed, but due to the political changes in Ecuador, the mining contract review was suspended, and the project was unable to start production; Kamoa-Kakula was hit by a mine earthquake and underground flooding in 2025, leading to a slowing down of the underground development pace and a conservative mining operation strategy, resulting in an adjustment to the 2026 production target. Additionally, Escondida's production fell in 2026, mainly due to declining ore grades entering the mill, delay in approval for beneficiation expansion projects, and local constraints on water resources and energy supply. In 2027, with the release of Mirador's production capacity and the full recovery of First Quantum and Grasberg, a total increment of over 600,000 tons is expected. In 2028, production capacities recover from Anfahow, Rio Tinto, and Freeport, reaching a total increment of about 550,000 tons. Refined copper supply and demand analysis Copper ore increment dominates future refined copper production, with global refined copper production growing at 1.5%, 2.3%, 2.3% in 2026-2028 With the decrease in global copper mine supply in 2025, refined copper production growth is based on consuming inventory and increasing the amount of scrap copper entering the furnace. In 2025, despite the historically negative spot TCs due to the tightening of supply, refined copper production continued to reach new highs, mainly because of the significant profitability maintained by smelters due to the high prices of by-products and a large consumption of copper concentrate stocks. Copper ore release is expected to dominate the pace of refined copper increment, with global refined copper growth rates of 1.5%, 2.3%, 2.3% in 2026-2028. Due to the significant consumption of refined copper concentrate stocks in 2025, there will be a copper ore increment to lead refined copper production. Combining copper ore and scrap copper releases, estimated global refined copper production will be 27.93 million tons, 28.56 million tons, 29.21 million tons in 2026-2028, with increases of 410,000 tons, 630,000 tons, 660,000 tons, a growth rate of 1.5%, 2.3%, 2.3%. The rise of AI and high growth in new energy are driving copper demand, with global copper usage growing at 2.4%, 2.9%, 2.9% in 2026-2028 Copper is a cost-effective conductor. According to Wood Mackenzie data, in 2024, copper is classified by usage performance as 77% for electrical conductivity, 11% for ductility, 10% for thermal conductivity, and 2% for signal transmission, and by end-use scenarios as 29% for electricity, 25% for buildings, 21% for consumer goods, 14% for transport, and 11% for industry. Its excellent and cost-effective electrical conductivity makes copper an indispensable basic raw material in the current era of energy transformation, particularly in end-use applications such as electricity, buildings, new energy vehicles, and more. In China, copper used for end-use is distributed in power distribution (44%), household appliances (13%), transportation (15%), buildings (11%), machinery and electronics (12%), and others (7%). The rise of AI, increased global investment in electricity and grid scalability, becomes a major force driving copper consumption growth. The copper used in the electricity industry is mainly divided into two parts: the electricity system during the construction of power plants, such as high voltage switches, busbars, etc., and the grid system during transmission, such as transformers, high voltage cables, low voltage cables, etc. With the advancement of end appliances automation and AI computing power, combined with the shift from traditional thermal power to a mix of wind, solar, and nuclear power on the power supply side, the traditional grid capacity is insufficient to meet the demand, leading to a new round of grid reforms. Bloomberg data shows that global grid investment has accelerated in the past three years, with a compound annual growth rate of 13%. To meet the growing need for AI computing power, it is expected that investments in power grids in China and the US will advance at a rate of over 10% in the next five years. The three heroes of new energy: new energy vehicles, wind power, and photovoltaics, are increasing the percentage of copper used, steadily boosting copper consumption growth. The demand for copper in new energy vehicles' batteries, motors, high-voltage connectors, has significantly increased from that of traditional vehicles. According to ICSG calculations, the amount of copper used per vehicle is 23kg for conventional cars, 40kg for hybrid electric vehicles, 60kg for plug-in hybrid electric vehicles, and 83kg for pure electric vehicles. Based on new energy production and consumption estimates, it is expected that the copper used for new energy vehicles and complementary charging stations will be around 2.11 million tons globally in 2026, accounting for 7.5% of global copper consumption. Given the low penetration of overseas electric vehicles and the growth potential, it is estimated that copper demand in the automotive sector will increase by 33,000 tons, 33,000 tons, and 30,000 tons in 2026-2028. The metal copper in the photovoltaic field is concentrated downstream in the power generation and transmission process, such as copper pipes used to manufacture solar collectors, high and low voltage cables, and electrical equipment used in the transmission process. According to ICSG studies, the copper consumption per unit in the photovoltaic sector has shown a decreasing trend in recent years. In 2025, copper prices hit an all-time high, government subsidies receded, intensifying competition in the solar industry, unprecedented cost pressures made aluminum replace copper more extensively in the photovoltaic sector. Aluminum-copper substitution occasions in photovoltaic include connecting solar cells and transmitting power to inverters, connecting inverters and box-type transformers, connecting box-type transformers and main transformers, and power transmission lines. Aluminum-copper substitution has been reduced to 0.28 tons/GW. It is estimated that the copper consumption in the photovoltaic sector in 2026 will be around 1.91 million tons, accounting for 7% of global copper consumption, with a predicted growth of -120,000 tons, 50,000 tons, 90,000 tons in 2026-2028. Wind power electricity mostly requires copper for generator, transformer, cables, gearbox, tower cables, etc. For onshore wind turbines, the electricity collected by the collector cables is connected to a substation, and from there to the electrical and transmission network. For offshore wind turbines, the electricity collected by the collector cables is connected to an offshore boosting station, then connected to the ground substation through power cables, and finally to the transmission network. According to Wood Mackenzie data, onshore wind turbines require approximately 0.54 tons of copper per GW of installed capacity, while offshore wind turbines require about 1.53 tons of copper per GW. Based on the Global Wind Energy Council's "Global Wind Energy Report 2026," the wind energy sector is expected to increase its annual new installed capacity from 117 GW in 2023 to at least 212 GW by 2030, which is estimated to be 980,000 tons of copper used in the wind power sector in 2025, accounting for 3.5% of global copper consumption. Given the growth trajectory of wind power, it is expected that copper demand in the wind power sector will increase by 25,000 tons, 40,000 tons, 30,000 tons in 2026-2028. The commodity attribute of copper price and financial property Commodity attributes: The tight balance of supply continues, with a shortage, supporting the upward shift of the copper price center Expected global copper market will be in a tight balance in 2026-2028 with a widening forward gap Overall, global refined copper supply is expected to be 27.52 million tons, 27.93 million tons, 28.56 million tons in 2026-2028, with annual growth rates of 1.5%, 2.3%, 2.3%. Global refined copper demand is expected to be 28.03 million tons, 28.84 million tons, 29.69 million tons in