US-Iran Rapprochement Boosts Macro Expectations. Supply Storm and AI Infrastructure Resonance, Four Major Investment Banks Bullish on Copper Performance

From the supply side, production at major global copper mines recorded negative year-over-year growth again in the first quarter of 2026, with Freeport-McMoRan seeing the most significant reduction. The primary cause was the suspension of operations at Indonesia’s Grasberg copper mine following a mudslide in September 2025, with the subsequent restart progress significantly trailing expectations; moreover, the prolonged shutdown led to a sharp rise in the proportion of underground wet ore, necessitating a comprehensive overhaul of the ore conveyance system and further hindering capacity release.

In its first-quarter 2026 earnings report, Freeport significantly lowered its copper sales guidance for the next two years: 2026 sales were cut to 1.406 million tonnes from the 1.542 million tonnes projected in January, while 2027 sales were lowered to 1.724 million tonnes from 1.860 million tonnes. Both years saw downward revisions of 136,000 tonnes, which also represents a 136,000-tonne reduction compared to the initial guidance issued in November 2025.

On the other hand, the supply of sulfuric acid, a key chemical in copper leaching processes, remains tight due to the conflict in Iran and shipping blockades in the Strait of Hormuz. According to the latest data from CSC Financial, copper concentrate treatment charges (TC) have plunged to a record low of -$106 per tonne, rapidly eating into smelter margins; meanwhile, domestic sulfuric acid prices have surged to 1,525 RMB per tonne. Although byproduct revenue from higher sulfuric acid prices has partially mitigated the impact of falling TCs, the “scissors gap” between the two continues to expand.

In the latest developments, Chile’s Codelco lowered its copper production outlook amid declining ore grades and operational challenges, leading its actual 2025 output to hit its lowest level since 1998. Bloomberg reported last Friday that an internal audit revealed Codelco had misclassified nearly 27,000 tonnes of copper as finished goods, though the material still required additional processing.

The company indicated that the discrepancy accounts for about 2% of its previously reported 2025 output of 1.4396 million tonnes. While the findings will not impact its 2025 audited financial statements, the company will include explanatory notes alongside its production data.

From the demand side, the hardware requirements for power transmission and cooling systems in AI server clusters are significantly higher than those of traditional data centers, with copper usage per rack exceeding three times that of traditional facilities. As the global AI computing power race continues to escalate, the construction of hyperscale intelligent computing centers has entered an accelerated phase, making AI infrastructure the most certain new source of rigid demand in the copper consumption market.

Sprott Asset Management pointed out that AI is one of the core drivers of this round of demand growth, with its stimulus effect primarily transmitted through data centers and supporting power infrastructure. Crucially, demand for this type of infrastructure construction exhibits strong price rigidity and is unlikely to be significantly curtailed by rising copper prices.

From a long-term supply perspective, White emphasized that even before the current supply tightness emerged, the continuous decline in global copper ore grades had become a chronic industry issue, directly leading to reduced copper output per unit of capacity. Simultaneously, issues such as long development cycles for copper mine projects and restricted approvals for new projects have also constrained supply release over the long term.

Theoretically, rising metal prices should stimulate production expansion and dampen demand; however, White noted that current copper supply is subject to three practical constraints—geological conditions, permitting processes, and infrastructure—bottlenecks that cannot be overcome in the short term. He further stated that the market is sending a clear signal: to meet future global copper demand, it is necessary not only to maintain higher price levels but also for countries to introduce coordinated policies to accelerate the development of mining projects and enhance the resilience of the global copper supply chain.

The latest forecast from Mercuria, a world-renowned commodities trader, also suggests that copper demand will benefit from the growth of AI computing infrastructure.

The institution stated that global copper demand will increase by approximately 350,000 tons year-on-year in 2026, accounting for about 2.5% of the total projected annual demand. Although the short-term incremental share seems limited, Mercuria explicitly stated at an industry conference in Hong Kong earlier this month that the stimulus for copper demand from the AI computing infrastructure industry will replicate the growth trajectory seen during the golden development period of China’s electric vehicle and renewable energy sectors. It is reported that these two industries have rapidly grown into core pillars of global copper consumption in less than a decade.

UBS’s latest report indicates that industrial metal prices are supported by a positive macroeconomic environment, including U.S. rate cuts and a weaker dollar, confidence in AI trades, China’s anti-cutthroat competition policies, and potential further Chinese stimulus. Improving macroeconomic conditions are supporting capital flows into mining stocks. The bank believes the overall outlook for industrial metals is improving, the risk of a significant short-term demand slowdown is receding, and medium-term fundamentals for copper and aluminum remain attractive.

The bank believes that due to limited copper supply growth, coupled with pressure on refined output and a recovery in traditional demand drivers, fundamentals will continue to support prices in 2026 and 2027. It raised its copper price forecasts for this year and next by 3%, from $4.24 and $4.68 per pound to $4.37 and $4.80 per pound, respectively.

J.P. Morgan expects the average price of copper to be approximately $12,500 per tonne in 2026 and maintains its outlook for a full-year target price above $13,000. J.P. Morgan specifically highlighted the incremental effect of AI data center demand on copper consumption.

CITIC Securities believes that production expectations for major global copper miners have officially entered a decline for 2026, and expects copper prices to stabilize at $13,000 per tonne in the second quarter.

Citi recently stated in an analysis that navigation in the Strait of Hormuz is positive for growth expectations and restocking behavior, which, combined with a structural boost from energy transition demand, could see average copper prices reach $15,000 per tonne by the end of the year.

This content was translated using AI and reviewed for clarity. It is for informational purposes only.