Key mine operations are still in trouble, Chile once again lowered its 2026 copper production forecast

The Zhitong Finance App learned that due to the decline in production in some of the largest copper mines, Chile lowered its copper production forecast for the second consecutive quarter. Chile's National Copper Commission (Cochilco) released a forecast on Tuesday saying that due to weak production in Chilean mines owned by the Chilean National Copper Company (Codelco) and BHP.US (BHP.US), Chilean copper production is expected to fall 2.6% to 5.27 million tons in 2026. This forecast is lower than the 300,000 tons forecast for the previous quarter, and also lower than the 5.6 million tons previously forecast.

Cochilco pointed out that weak production expectations for 2026 are due to particularly poor performance in the first half of the year — output declined at the Escondida and Spence mines owned by Codelco, BHP Billiton, and structural restrictions in several operating mining areas at the same time. The data shows that in the first five months of 2026, Chile's copper production fell by about 9% year on year, and fell by about 14% and 13% in April and May, respectively.

The agency said production is expected to recover partially in the second half of the year, thanks to improvements at Codelco's El Teniente mine, progress in the company's Rajo Inca project, improved stability at Tektronix Resources' Quebrada Blanca mine, normalized production at Capstone Copper's Mantoverde mine, and improvements in ore and water conditions at the Collahuasi mine, which is jointly owned by Anglo-American Resources, Glencore, and the Japanese consortium.

Meanwhile, Cochilco expects copper production to pick up in 2027. The agency predicts that Chile's copper production will rebound to 5.55 million tons in 2027, supported by a lower comparative base and gradual recovery of operations and rising production capacity. The agency said the main increases will come from Codelco, Quebrada Blanca, Escondida, Collahuasi, Los Pelambres, and Mantoverde.

Cochilco also raised the 2026 average copper price forecast to $5.95 per pound and maintained the 2027 estimate of $5.10 per pound, saying that strong global demand and continued supply restrictions will keep the market tight. Cochilco said that in 2026, global copper demand is expected to be 27.8 million tons, an increase of 1.9%; of these, China is the main driving force, and its consumption is expected to increase 2.7% to 16 million tons, accounting for 57.6% of global demand.

Cochilco's latest adjustments to Chile's copper production expectations have further heightened market concerns about global copper supply. Disruptions in mine production and declining ore grades are limiting production growth, while demands from electrification, grid construction, and data centers are increasing.

Cochilco expects global copper production to grow by only 0.2% this year, which means that even if the refined copper market remains slightly oversupplied, global supply has very limited buffer space in the face of further production disruptions.

Recently, as investors await the US Trump administration's decision on refined copper tariffs and the prospects for navigation through the Strait of Hormuz remain uncertain, copper prices are close to historic highs. Although the June 30 deadline for US Secretary of Commerce Lutnick to submit tariff proposals has passed, the White House has yet to announce the final policy. Producers, consumers, and traders are closely watching whether Trump will further extend current trade protection measures for semi-finished copper products to refined raw materials such as copper. However, no timetable has yet been announced for when the Trump administration will make a final decision on whether to levy tariffs on refined copper.

Driven by tariff expectations, US official COMEX copper stocks have increased by more than 40% since this year, reaching a record high. Currently, the market generally estimates that the total inventory of copper in the US has exceeded 1 million tons. The market believes that in the context of rapid development of power grid construction, artificial intelligence (AI), electric vehicles, and defense industries, copper is becoming an increasingly important strategic resource for the US, and tariff expectations are objectively driving the US to establish strategic inventories ahead of schedule.

However, behind the continued increase in US copper inventories, stocks from other regions of the world are constantly being drawn out — America's higher import tax rate has prompted large amounts of copper resources to flow to US ports, leading to tighter supply in other regional markets. According to the data, the US imported about 200,000 tons of copper in July, setting the highest record in a single month since IHS Markit began statistics in 2014, and the fastest import rate in at least 12 years. Currently, about 110,900 tons of copper are stored in US ports outside the London Metal Exchange (LME) warehouse receipt system.

Meanwhile, with regard to the situation in the Middle East, market concerns about the further escalation of the US-Iran war are shifting to expectations that the two sides will reach an agreement and reopen the Strait of Hormuz. According to the latest news, on August 11 local time, Pakistan's Defense Minister Asif said that the US and Iran are close to reaching “some kind of arrangement.” In an interview, Asif said that the situation is once again moving in a direction conducive to reaching a peace arrangement or agreement. “The signals sent over the past two or three days indicate that we are close to reaching some kind of arrangement.”

Most commodities, including basic metals such as copper, are expected to benefit from measures to promote the resolution of the Middle East conflict that has impacted the global market since this year. The latest round of optimism allayed market concerns about inflation, and weak US non-farm payrolls data released last week prompted traders to lower their bets on the Fed raising interest rates for the rest of 2026. This is beneficial for base metals, which are highly correlated with global economic growth expectations.

Looking at the medium to long term, copper prices are still expected to be supported. On the demand side, copper is widely used in various fields such as electric vehicle batteries and data centers. Under the wave of rapid advances in global artificial intelligence (AI) computing power infrastructure, data centers are becoming veritable “new copper mines.” Copper, a traditional industrial metal, has become a core material supporting the development of the artificial intelligence industry due to its irreplaceable electrical and thermal conductivity. The Morgan Stanley report predicts that global data center copper consumption will increase to 740,000 tons in 2026, contributing 0.6 percentage points to the increase in global copper demand; by 2027, data center copper consumption is expected to reach 1 million tons (2.8% of total demand), and further increase to 1.3 million tons (accounting for 3.3%) in 2028, with a compound annual growth rate of 40%.

In an earlier report, Jefferies estimated that by 2030, total global copper demand will reach 30.93 million tons, with a compound annual growth rate of 2.1% from 2025 to 2030. Among them, electric vehicles led the way with a growth rate of 9.6%, and data centers and renewable energy (wind power+photovoltaics, excluding power grids) also reached 6.1% and 6.7%, respectively. On the supply side, it is difficult to keep up with the pace. The global copper supply in 2030 is expected to be only 3.09 million tons, which would mean a gap of about 840,000 tons. Based on this gap, Jeffrey's forward price benchmark is — copper will reach 6.50 US dollars/lb, or 14,330 US dollars/ton by 2030.

Jefferies put it bluntly: “Even in a world where the global GDP growth rate is only 2%, the copper market will still experience significant supply and demand shortages over the next 12 months and more.” This means that the core driving force behind this round of rising copper prices is not short-term excitement fueled by macro-sentiment, but rather a real “physical shortage” on the supply side. The copper market may be leaving the cyclical cycle of “rising for three years and falling for two years” in the past, and it is likely that it is facing a mismatch between supply and demand that will continue for several years.