Copper has a long history of mine supply disruption, but this year is proving to be a particularly troubled one for a sector that has been racing to keep up with smelter demand.
Several of the world's largest copper mines have experienced unexpected production hits and the cumulative impact will be felt in full force next year, according to the International Copper Study Group (ICSG).
Tightness in the mined concentrates segment of the market will act as a hard brake on refined copper production growth in 2026, the Group said in its latest biannual statistical update.
Even with demand growth expected to slow next year, metal production is projected to fall short by 150,000 metric tons. It's a significant revision from the Group's last meeting in April, when it was expecting a 209,000-ton supply surplus.
MINE SUPPLY GROWTH STALLS
With many copper mines operating in remote, challenging conditions, a degree of unforeseen disruption is hard-wired into the market's supply profile.
This year, however, is proving to be an outlier of the worst kind with a string of accidents at several of the world's mega mines.
Ivanhoe Mines' (IVN.TO) Kakula mine was hit by seismic activity and subsequent flooding in May. Chilean state producer Codelco's El Teniente mine suffered a fatal collapse in July and Freeport-McMoRan's (FCX.N) Grasberg mine experienced a devastating inflow of mud in September.
The ICSG has unsurprisingly cut its 2025 mine supply forecasts, with growth now expected to be just 1.4%, down from a previous forecast of 2.3% and actual growth of 2.8% in 2024.
This is still a pretty conservative call. Analysts at Citi and UBS, for example, are forecasting "no growth" and "negligible growth" respectively this year.
HITTING THE BRAKES
The loss of units will take some time to feed through to the refined segment of the copper market.
The ICSG has actually lifted its assessment of metal production growth this year to 3.4% from April's 2.9% to reflect the surge in new Chinese smelter capacity.
But growth next year will slow to a 0.9% crawl, with production constrained by a shortage of mined concentrates.
Even that lowball figure flatters to deceive. Production from secondary recyclable sources is expected to rise by a robust 6.0% next year, while straight-to-metal mine output using leaching technology will increase by 2.2%.
Primary production at smelters using concentrates as feed will by implication struggle to register any growth at all.
The imbalance between raw material availability and smelter demand is likely to accentuate already fierce competition for copper concentrates.
SURPLUS TODAY, GONE TOMORROW
The ICSG concludes that despite tepid demand growth of 2.1% next year, the copper market is on course to register a supply deficit after two consecutive years of surplus.
But not quite yet.
This year is still expected to be a year of plenty, although the Group has trimmed the forecast production surplus to 178,000 from 289,000 tons at its April meet.
Most of the surplus metal is in the U.S. due to the incentive created by the threat of import tariffs on refined copper, deferred until next year.
Stocks of copper registered with U.S. exchange CME now exceed those held by the London Metal Exchange and the Shanghai Futures Exchange combined.
However, even as global inventory has moved location, total exchange stocks have risen by 120,000 tons since the start of the year, with the strong likelihood there is more copper sitting in off-market storage in the United States.
The current inventory cushion is acting as a counterweight to the market's bullish exuberance.
But futures markets price in future expectations. The LME three-month metal price , currently bubbling just below the $11,000-per ton level, comes with a delivery date of January 2026.
And next year is when the copper market looks set to feel the full impact of this year's string of mine supply shocks.
Andy Home is a Reuters columnist. The opinions expressed are his own
