Copper’s Price Shock: Bank of America Warns of Supply Perfect Storm

In its latest report, Bank of America has significantly raised its copper price forecasts, explicitly stating that the copper market is entering a structural bull market.

The report increased the average price expectation for 2026 by 11% to $11,313 per ton and for 2027 by 12.5% to $13,501 per ton. It further projected that prices could potentially peak around $15,000 per ton (approximately $6.80 per pound). This optimism comes as CME three-month copper prices rose 1.4% to $10,643 per ton on Monday.

This bullish outlook is primarily anchored on three key pillars:

1. Persistent Supply Disruptions: Beyond the Grasberg mine accident, delays at Chile’s Quebrada Blanca Phase 2 project and the indefinite suspension of First Quantum’s Cobre Panamá mine are collectively exacerbating supply tightness.
2. Resilient Demand Exceeding Expectations: Robust investment in China’s power grid and demand from AI infrastructure remain steady, while consumption in Europe is also showing signs of recovery.
3. Looming Inventory Crisis: Inventories on the London Metal Exchange (LME) continue to hover at historically low levels. Any further acceleration in consumption could easily trigger a short squeeze.

The supply shock was notably intensified by a recent major accident at the Grasberg copper mine in Indonesia, operated by Freeport-McMoRan. As the world’s second-largest copper mine, Grasberg produced 815,000 tons last year, accounting for 4% of global supply. The scale and impact of the incident are described within the industry as “unprecedented.” Freeport preliminarily estimates that the mine might not return to its pre-accident production capacity until 2027.

The accident immediately sent shockwaves through the market. Following Freeport’s declaration of force majeure, LME copper prices surged to $10,485 per ton, a 15-month high. The situation is particularly critical as the global copper supply chain was already tight; this shutdown will significantly worsen the supply-demand imbalance.

Quantifying the Production Loss:

• Short-Term Impact: Q4 production is nearly wiped out. The loss volume is equivalent to the projected annual output of Collahuasi, the world’s third-largest copper mine, next year. Freeport has cut its sales target for next year by 35%.
• Long-Term Deficit: Benchmark Mineral Intelligence (BMI) calculates that from September 8th (the date of the accident) to the end of 2026, nearly 600,000 tons of cumulative production will be lost.

BMI data shows that the world’s top 20 copper mines, which account for 36% of global production, collectively face challenges including complex geology, operational issues, and socio-political policies. The larger the mine, the more significant the impact of any accident on the global supply chain. Citigroup warns that without significant price increases to stimulate new supply, the global copper deficit could widen to 400,000 tons by 2026, with an additional 350,000-ton shortfall in 2027.

This mine accident has exposed the global copper industry’s over-reliance on super-giant ore bodies. It also signals that, against the backdrop of the energy transition and the AI revolution driving long-term demand growth, supply-side vulnerabilities could continue to push price volatility risks higher.

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