China Galaxy Securities released a research report stating that the logic of a global copper mine supply shortage and increasing risks of regional refined copper supply imbalances, coupled with expectations of loose liquidity, is expected to continue driving up copper prices.
According to Zhitong Finance, China Galaxy Securities released a research report stating that the logic of global copper mine supply shortages and the exacerbation of regional refined copper supply imbalances, coupled with expectations of loose liquidity, are likely to continue driving up copper prices. The report recommends paying attention to leading domestic copper mining companies. Frequent disruptions at major copper mines this year have led to continuous downward revisions in global copper mine production forecasts for 2025, from an initial anticipated increase of over 700,000 tons to virtually no growth currently; meanwhile, the global copper mine increase for 2026 is only around 500,000 tons. Given the significant amount of smelting capacity under construction/planned for release both domestically and internationally, it is expected that the global copper mine deficit may further widen by 2026.
Event: On December 3, LME copper registered warehouse stocks were 105,275 tons, a year-on-year decrease of 32.3%; canceled warehouse stocks were 56,875 tons, a year-on-year increase of 802.78%, with delivery orders reaching a new high since 2013, primarily from warehouses in Taiwan, China, and South Korea. On December 3, LME three-month copper futures surged nearly 3% intraday, once touching a record high of $11,540 per ton, continuing the volatile upward trend since November. Affected by this, on December 4, Shanghai copper futures broke through the RMB 90,000 per ton mark for the first time, reaching a high of RMB 91,450 per ton intraday, closing at RMB 90,980 per ton, with a daily increase of 2.3%.
The main viewpoints of China Galaxy Securities are as follows:
Expectations of additional tariffs on U.S. copper are leading to regional imbalances in global copper supply:
Trump previously requested Lutnick to reevaluate the status of the U.S. domestic copper market by June 2026, at which point a decision will be made on whether to implement a phased introduction of import taxes on refined copper. With the possibility that the U.S. may impose additional tariffs on refined copper in the future, U.S. copper is trading at a significant premium compared to other regions. The 'siphon effect' of U.S. copper has resulted in the distortion of global inventory distribution and low inventories in non-U.S. regions, potentially causing regional copper shortages outside the U.S. in 2026.
By the end of 2025, Chile's Codelco significantly increased the premium for refined copper supply in 2026: quotes for China were $335-350 per ton, representing a 275% increase over 2025; quotes for Europe were $325-345 per ton, marking a 39% increase over 2025; and quotes for South Korea were $330 per ton, reflecting a 288% increase over 2025. This indicates expectations of trade flows and tight copper supply in non-U.S. regions in 2026. The surge in copper withdrawals from LME Asian warehouses in December reflects the potential rush to secure refined copper amid expectations of tightening copper supply in non-U.S. regions in 2026. The logic behind rising copper prices driven by increasing risks of global regional supply imbalances in 2026 is becoming evident.
Ongoing scarcity in mined copper supply and intensifying mining-smelting conflicts:
Frequent disruptions at major copper mines this year have led to continuous downward revisions in global copper mine production forecasts for 2025, from an initial anticipated increase of over 700,000 tons to virtually no growth currently; meanwhile, the global copper mine increase for 2026 is only around 500,000 tons. Given the significant amount of smelting capacity under construction/planned for release both domestically and internationally, it is expected that the global copper mine deficit may further widen by 2026.
New copper smelting capacities overseas in 2026 will also compete with domestic smelters for copper concentrate raw materials. Market expectations suggest that the long-term contract price for domestic TC/RC in 2026 may drop significantly from $21.25 per ton in 2025, potentially approaching zero or even negative figures. At this sensitive juncture for negotiating 2026 smelting processing fees, to strengthen the bargaining position of domestic smelting companies, last weekend CSPT reached a consensus to reduce milled copper production capacity by more than 10% in 2026 to improve the supply-demand fundamentals of copper concentrate.
Additionally, the Ministry of Industry and Information Technology (MIIT) may introduce anti-overheating policies during the 15th Five-Year Plan to restrict newly added smelting capacities lacking self-owned mining rights in recent years, helping domestic copper smelting enterprises enhance their negotiation leverage. At this critical juncture for 2026 copper smelting processing fee negotiations, market expectations might anticipate that the shortage in mined copper will accelerate its impact on refined copper, given the possibility of smelter-led production cuts. If domestic smelting output reductions occur, the 2026 refined copper supply-demand balance could shift from tight equilibrium to shortage. Intensified conflicts between miners and smelters during long-term smelting contract negotiations may deepen expectations of copper supply shortages in 2026, pushing copper prices higher.
Scrap copper becomes a crucial supplement to raw material supply but remains insufficient to bridge the concentrate shortfall:
Under Trump's tariff policies, high costs have continued to suppress China’s willingness to purchase scrap copper raw materials. From January to October 2025, China imported 137,000 tons of scrap copper from the U.S., a sharp year-on-year drop of 62%. However, imports were rerouted through countries like Japan (cumulative increase of 59,000 tons) and Thailand (cumulative increase of 117,000 tons). Amid expectations of tight global copper supply, competition for scrap copper raw materials will intensify. Domestically, uncertainties surrounding Policy Documents No. 783 and No. 770 have prompted companies that previously relied on policy incentives to obtain low-cost scrap copper raw materials to cut or halt production. This has led to a shortage in anode plate supply, with scrap copper unable to compensate for the shortfall in copper concentrate.
Macroeconomic expectations are improving, liquidity is easing at the margin, and energy transition and AI infrastructure are driving incremental copper demand.
On the demand side, electrolytic copper consumption in China grew robustly in 2025, supported by expectations of domestic economic recovery, which is likely to keep copper demand stable going forward. The easing of the U.S.-China trade war, coupled with the Federal Reserve’s sustained accommodative stance, has spurred manufacturing reshoring, reindustrialization, and developments in new energy and AI-related power needs in developed countries overseas, leading to renewed growth in foreign copper demand. Additionally, expectations for a Federal Reserve interest rate cut in December are rising, and Kevin Hassett, aligned with Trump’s camp, is highly likely to become the next Federal Reserve Chair. This would strengthen Trump’s administration’s control over the White House, bolstering market expectations of loose liquidity from the Federal Reserve in 2026, which is also favorable for copper price increases.
Risk Warning:
1) Risk of weaker-than-expected domestic economic recovery; 2) Risk of the Federal Reserve cutting interest rates less than anticipated; 3) Risk of significant declines in nonferrous metal prices; 4) Risk of unexpected escalation in U.S.-China tariff disputes.
