Copper Market: Reality Check from Macquarie Amidst Price Surge

By USA Mining News Staff Writer | July 9, 2026

New York copper markets saw robust activity on Thursday, July 9, 2026, with the red metal trading at $6.27 per pound, equivalent to just over $13,800 per tonne, marking a 2.6% increase by lunchtime. This upward movement was notably influenced by a fall in oil prices, following statements from former US President Trump regarding renewed negotiations with Iran, alongside fresh tariff threats circulating in the United States. Specifically, the Commerce Department announced its intent to establish processes for expanding tariffs, potentially up to 50%, to a broader range of downstream copper products by the conclusion of the 2026 fiscal year. Such governmental actions often introduce significant volatility and reassessment within commodity markets, particularly for globally traded metals like copper.

However, despite the recent bullish momentum, a new commodities compendium from Macquarie Strategy, titled Spinning Plates, presents a cautionary outlook. The esteemed financial institution argues that copper prices are currently exhibiting a significant disconnect between enthusiastic investor sentiment and deteriorating physical market fundamentals. Analysts from Macquarie's key global offices, including London, Shanghai, and Singapore, assert that the world is far from experiencing a copper shortage. In fact, they foresee substantial market surpluses for the foreseeable future, suggesting that current price levels are unsustainable in the near term.

The Contradiction: Bullish Sentiment vs. Weakening Fundamentals

Macquarie's core thesis revolves around a perceived imbalance in the copper market. On one side, investor optimism, often fueled by long-term electrification narratives and the energy transition, has driven significant capital into copper futures and related equities. On the other, the physical market is telling a different story of excess supply and softening demand. The bank's detailed analysis highlights that the recent rally, which saw copper surge from below $12,000 per tonne in late March to well over $14,000 by the end of May, before easing slightly, was propelled primarily by speculative positioning, short-covering activities, and tariff-related trade flows. This indicates that the price appreciation was more a result of financial maneuvering and geopolitical considerations rather than genuine, robust physical tightness in the global supply chain.

Surging Inventories Signal Supply Glut

A critical component of Macquarie's argument against the prevailing bullish sentiment is the dramatic rise in global copper inventories. The bank reports that visible stocks have increased by more than 870,000 tonnes since the beginning of 2025, a substantial accumulation that underscores a market moving into surplus. This build-up included an addition of 444,000 tonnes in 2025 alone, followed by a further 429,000 tonnes accumulated so far in 2026. These figures represent a significant overhang on the market, directly contradicting any narrative of immediate supply scarcity.

Specific details on inventory levels across major exchanges paint an even clearer picture:

  • London Metal Exchange (LME) inventories: Have reached eight-year highs, indicating a substantial amount of available material within the global trading system.
  • COMEX stocks: Are at unprecedented levels, reflecting high inventories in North America.
  • Off-exchange stocks in the US: Macquarie estimates an additional 550,000 tonnes of copper is held in warehouses outside the primary exchange reporting mechanisms within the United States, further exacerbating the perception of surplus supply. This hidden inventory can significantly dampen price rallies when it eventually moves into the visible supply chain or influences market sentiment through its sheer volume.

Market Drivers: Positioning and Tariffs Outpace Physical Demand

Macquarie elaborates that the primary impetus behind the recent copper price rally has not been a robust increase in global industrial demand, but rather a complex interplay of financial positioning and trade policy. Notably, metal has been actively re-routed across the Atlantic due to the CME-LME arbitrage, as traders strategically position themselves around potential US copper trade measures. This dynamic arbitrage opportunity has effectively pulled copper into the US market, artificially tightening supply in other regions and creating a misleading appearance of global scarcity.

The bank suggests that the most probable scenario concerning US trade measures is not a swift or clear resolution, but rather prolonged uncertainty. This extended period of ambiguity is anticipated to keep significant volumes of copper within the US market, thus perpetuating an "artificial sense of tightness" in the broader global copper landscape. Such a scenario could lead to continued price volatility driven by policy speculation rather than fundamental supply-demand balances.

Lagging Demand: China and Beyond

On the demand side, Macquarie observes a general softening, particularly from key consumer nations. Chinese buyers, typically the largest consumers of copper globally, are reportedly stepping back from the market due to the prevailing high prices. China has experienced a substantial seasonal stock build, despite facing lower import volumes and increasing export activity of its own refined products. The usual seasonal drawdown of these stocks, a critical indicator of industrial activity, has stalled earlier than expected, signaling weaker domestic demand than previously anticipated. The persistent issues within China’s property market are cited as a primary ongoing drag on copper consumption within the country.

Beyond China, the demand landscape also appears subdued. Spot premiums for copper outside of China are significantly below annual contract levels, indicating ample immediate supply and a lack of urgency from buyers. This global softness in physical demand further contradicts the narrative of a market facing imminent shortages.

Mine Supply Challenges and Disruptions

Despite the overall market surplus, mine supply continues to underperform, adding another layer of complexity to the copper market. Macquarie’s analysis reveals that guidance from the 17 largest copper miners was collectively cut by 199,000 tonnes, revising their combined target to 13.8 million tonnes. This indicates inherent operational challenges in ramping up production to meet even projected demand scenarios.

Significant disruptions contributing to this underperformance include:

  • Kamoa-Kakula (Democratic Republic of Congo): Operated by Ivanhoe Mines, this pivotal mine faced severe flooding in May 2025. While Ivanhoe stated that output would ramp up in the second half of 2026, its production guidance for 2026 was kept at 290,000–330,000 tonnes. This figure is a substantial reduction from previous expectations of more than 500,000 tonnes before the flooding incident.
  • Grasberg (Indonesia): Freeport-McMoRan, the Phoenix-based mining giant, had initially targeted 771,000 tonnes of copper output from Grasberg for 2026. However, a significant mud rush disrupted operations. Freeport-McMoRan now expects a return to full production by the end of 2027, marking a considerable delay in anticipated output.

Even with these major disruptions factored into its forecasts, Macquarie projects modest mine supply growth of 1.3% for 2026 and an improvement to 4.4% in 2027. Crucially, these projections also hinge on the assumption that First Quantum Minerals' Cobre Panama mine, located in Central America, restarts operations in the second quarter of 2027 and ramps up production over six months to 385,000 tonnes per annum. This timeline for Cobre Panama is notably more optimistic than some observers expect, highlighting a potential point of fragility in future supply estimates.

AI Demand – A Slow Burn, Not a Sudden Surge

A recent bullish sentiment driver in the copper market has been the anticipation of significant demand from the rapidly expanding artificial intelligence (AI) sector, particularly for data centers. However, Macquarie is skeptical about the near-term impact of this "AI-driven copper demand." The bank points to several factors that could temper or delay the expected surge:

  • Project delays: Increasing public opposition, regulatory hurdles, and local grid constraints are causing slowdowns in data center development.
  • Equipment shortages: The specialized equipment required for high-density computing infrastructure can face supply bottlenecks.
  • Optical connectivity: The growing adoption of optical fiber and advanced network solutions for internal data center connections may reduce the per-unit copper intensity initially assumed by the market.

Consequently, Macquarie believes the actual copper impact from AI may be "smaller and slower" to materialize than the market currently assumes, preventing it from immediately offsetting broader demand weaknesses.

The Long-Term Picture: Structural Attractiveness Remains

While Macquarie maintains a cautious near-term outlook, its long-term view on copper remains fundamentally positive. The bank underscores copper's "structurally attractive" position due to its indispensable role in global electrification and the ongoing energy transition. Factors such as the growth of electric vehicles, renewable energy infrastructure, and grid modernization are expected to drive substantial demand over the coming decades.

For the period between 2025 and 2030, Macquarie forecasts:

  • Mine supply growth: An average of 2.8% per year.
  • Refined production growth: An average of 2.4% per year.
  • Demand growth: An average of 2.8% per year, primarily fueled by the aforementioned electrification trends.

By 2030, Macquarie anticipates the market will pivot back towards a more balanced state, implying that new mining projects will still be critically needed to satisfy escalating demand. This long-term outlook reinforces the strategic importance of copper but cautions against conflating future potential with present market realities.

Macquarie's Price Forecasts and Outlook

Despite the prevailing bullish sentiment and recent price increases, Macquarie's analysis firmly indicates an impending market correction due to the continuing surplus. The bank estimates that the copper market was already in a substantial 600,000-tonne surplus in 2025. It further projects another 262,000-tonne surplus for 2026, even after accounting for an allowance of 783,000 tonnes for various market disruptions. Looking ahead, for 2027 and 2028, Macquarie expects the surplus to average more than 700,000 tonnes annually, signaling a persistent oversupply condition.

Reflecting the current price momentum and broader macroeconomic support, Macquarie has raised its average copper price forecast for 2026 to $13,165 per tonne, up from its previous estimate of $12,310 per tonne. However, the bank is resolute in its expectation that the market will eventually correct. It forecasts a price floor of $11,000 per tonne by the third quarter of 2027, as fundamentals reassert themselves. For the long term, Macquarie has also adjusted its forecast, raising it to $10,200 per tonne in 2025 dollar terms. This long-term adjustment reflects a more balanced view of copper's future value, acknowledging both its critical role in the energy transition and the inherent supply-side challenges and market dynamics that shape its pricing.