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

From the supply side, global output from major copper mines saw another year-on-year contraction in the first quarter of 2026, with Freeport-McMoRan recording the most significant decrease. The primary cause was the suspension of operations at Indonesia's Grasberg mine following a mudslide in September 2025, with subsequent restart progress falling far short of expectations; additionally, the prolonged shutdown led to a significant increase in the proportion of wet underground ore, necessitating a comprehensive overhaul of the ore conveyance system, which further weighed on capacity release.

Freeport significantly lowered its copper sales guidance for the next two years in its Q1 2026 earnings report: sales for 2026 were revised down to 1.406 million tonnes from 1.542 million tonnes in January, and 2027 sales were cut to 1.724 million tonnes from 1.860 million tonnes, representing a reduction of 136,000 tonnes for each year, which is also 136,000 tonnes lower than the initial guidance provided in November 2025.

On the other hand, the supply of sulfuric acid—a critical chemical in the copper leaching process—continues to tighten due to the conflict in Iran and shipping disruptions in the Strait of Hormuz. The latest data from CSC Financial shows that copper concentrate treatment charges (TC) have plummeted to a record low of -$106 per tonne, rapidly eroding smelter margins, while domestic sulfuric acid prices have climbed to 1,525 yuan per tonne. While the byproduct revenue from higher sulfuric acid prices has partially offset losses from falling TCs, the gap between the two continues to widen.

In recent news, Codelco lowered its copper production outlook due to low ore grades and operational issues, causing its actual 2025 output to fall to its lowest level since 1998. According to a Bloomberg report last Friday, an internal audit discovered that Codelco had misclassified nearly 27,000 tonnes of copper as finished product, when it actually required further processing.

The company stated that the aforementioned discrepancy represents approximately 2% of its previously reported 2025 production of 1.4396 million tonnes; the findings will not affect its audited 2025 financial statements, though explanatory notes will be added to the production data.

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

Sprott Asset Management noted that AI is one of the core drivers of this round of demand growth, with its stimulus effect transmitted primarily through data centers and supporting power infrastructure. Crucially, demand for such infrastructure construction exhibits strong price rigidity and will not decrease significantly due to rising copper prices.

From a long-term supply perspective, White emphasized that even before the emergence of current supply constraints, the continuous decline in global copper ore grades had become a chronic industry problem, directly leading to lower copper production per unit of capacity. Simultaneously, lengthy project development cycles and regulatory hurdles for new mines have long restricted supply growth.

In theory, rising metal prices should stimulate production expansion and dampen demand; however, White pointed out that current copper supply faces triple constraints from geological conditions, approval processes, and infrastructure, none of which can 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 not only necessary to maintain higher price levels but also for countries to introduce coordinated policies to accelerate mining project development and enhance the resilience of the global copper supply chain.

A recent forecast from world-renowned commodities trader Mercuria also suggests that copper demand will benefit from the growth of AI computing infrastructure.

The firm stated that global copper demand will grow by approximately 350,000 tons year-over-year in 2026, accounting for about 2.5% of total projected annual demand. While this short-term increment may seem limited, Mercuria stated at an industry conference in Hong Kong earlier this month that the copper demand generated by AI computing infrastructure will replicate the growth trajectory of China's electric vehicle and renewable energy sectors during their golden development periods. These two industries have rapidly become the primary pillars of global copper consumption in less than a decade.

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

The bank believes that due to factors such as limited growth in copper supply, pressure on refined output, and a recovery in traditional demand drivers, fundamentals will continue to support prices in 2026 and 2027. It has 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, respectively.

JPMorgan expects the average copper price to be approximately $12,500 per tonne in 2026 and maintains its judgment of a full-year target price above $13,000. JPMorgan particularly emphasized the incremental effect of AI data center demand on copper consumption.

CITIC Securities believes that production forecasts for the world's major copper miners have officially entered a decline for 2026, and expects copper prices to hold steady at $13,000 per tonne in the second quarter.

Citi recently analyzed that navigation in the Strait of Hormuz favors growth expectations and restocking behavior, and combined with the structural boost in energy transition demand, average copper prices are expected to reach $15,000 per tonne by year-end.

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