Mayank Bansal, CFA
Mayank Bansal is a CFA Charterholder and heads the Equity Research team at Kapitales Research, with over 5 years of experience analysing global equity markets. He leads fundamental, data-driven research combining rigorous financial analysis with macro trends.
Can Copper Rebound as Chile Supply Risks Collide With Mixed Chinese Demand?
Highlights:
Copper Retreats from Record Territory
Copper has entered the fourth quarter caught between tightening supply conditions and an uncertain demand picture from China. Futures traded around US$6.49–US$6.51 per pound in early October, close to a two-week low after retreating from September’s record levels. Despite the pullback, copper remained roughly 29% higher year-on-year, highlighting the strength of the broader rally.
The recent weakness reflects a market reassessing how much of copper’s strong run can be sustained. China remains central to that debate. China’s industrial earnings expanded 15.7% from a year earlier across January–August 2026, moderating from the 17.6% rise seen in the first seven months. However, September manufacturing indicators pointed to renewed factory expansion, providing a more constructive signal for metals consumption.
China’s week-long holiday is also expected to reduce trading activity temporarily, potentially leaving copper more sensitive to developments on the supply side.
Chilean Output Adds to Supply Anxiety
Attention is increasingly shifting toward Chile, the world’s largest copper-producing nation. August production dropped 12.8% year-on-year to 369,500 tonnes, compared with 423,643 tonnes a year earlier. The decline was linked to adverse weather conditions and weaker ore grades, reinforcing concerns over the ability of major producers to quickly lift mine supply.
Several developments are keeping the supply outlook unsettled:
These risks are particularly significant because declining ore grades can create longer-term production constraints rather than merely temporary interruptions.
Physical Market Signals Remain Firm
Copper’s underlying physical market is providing some counterweight to weaker futures prices. Shanghai Futures Exchange inventories recently declined 17.8% in a week to 38,744 tonnes, their lowest level since January 2024. Meanwhile, the Yangshan import premium remained elevated, indicating continued Chinese interest in imported copper.
Global balances also remain tight. International Copper Study Group data cited in recent market reporting showed a 51,000-tonne refined copper deficit in July, although the first seven months of 2026 still produced a modest 32,000-tonne surplus.
Tariffs and Panama Complicate the Picture
Policy developments could add another layer of volatility. Large volumes of refined copper have accumulated in US warehouses amid expectations of possible American import tariffs, potentially reducing metal availability elsewhere. A final policy determination on imposing tariffs on refined copper has yet to be announced by the Trump administration.
At the same time, Panama has proposed restarting operations at a major copper mine, a development that could eventually improve supply if production returns.
Copper Outlook: Supply Meets the China Test
Copper’s next major move may depend on which side of the market gains momentum first. A sustained improvement in Chinese manufacturing could reinforce demand just as Chilean output weakness and labour disputes restrict supply. Conversely, softer industrial activity or a meaningful recovery in mine production could ease current tightness.
For now, copper’s retreat toward US$6.50 per pound appears less like a simple collapse in fundamentals and more like a recalibration after September’s record-breaking rally. With Chilean production under pressure, inventories tight in key markets and China sending mixed economic signals, the fourth quarter could remain highly sensitive to both supply disruptions and shifts in global industrial demand.
Note- All data presented is based on information available at the time of writing.
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