Global Commodities: Supply disruptions give copper prices breakout velocity
The desk highlights a bullish outlook on copper prices, driven by an unexpected supply disruption at Freeport's Grasberg mine in Indonesia which is set to tighten the copper market significantly. Per the full note from J.P. Morgan Global Research, this disruption has led to a recalibration of their supply and demand balance, projecting deficits not just for this year but extending into 2026. This development aligns with the desk's broader assessment of commodities under strain and suggests a potential price target nearing $11,250/mt as fundamentals become more constrained, indicating robust future performance. Moving forward, traders should remain vigilant given current dynamics and assess positioning in related commodities.
What the desk is arguing
The desk is projecting a bullish sentiment towards copper prices due to the supply constraints stemming from the Grasberg mine disruption. This scenario presents a significant tightening of fundamentals and supports a price increase towards $11,250/mt in the near term, according to insights shared by J.P. Morgan.
The updated forecast from J.P. Morgan indicates a shift in the copper market from surplus to deficit in both 2025 and 2026, responding to the limitations on ex-U.S. inventories, which underscores the urgency of this bullish narrative. Notably, the company's head of metals research, Greg Shearer, articulates the implications of these tighter fundamentals, emphasizing that a lack of available copper could exacerbate price elevation.
Where it sits in our coverage
Our consensus target for copper reflects a rounded figure of 1.075, operating within a range of 1.04 to 1.12. Firms involved in this forecast include: - jpmorgan: target 1.10, Mar26 - bofa: target 1.04, Mar26
This view aligns with jpmorgan, which is bullish and targets a higher price point, while bofa offers a more conservative stance. The current desk outlook is at the upper bound of the consensus range, reinforcing our proactive position.
How other firms see it
The commentary regarding the copper market disruption finds alignment primarily with jpmorgan, given their recent bullish re-evaluation. In contrast, the outlook from bofa indicates a more cautious approach, focusing on potential overvaluation risks in commodities amidst global economic fluctuations.
Watch for developing momentum in the copper space, particularly with movements in related markets such as the copper futures and overall commodity index, where unforeseen challenges could influence trading behavior significantly.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Unexpected supply disruption at Grasberg mine leads to bullish copper outlook.
- 02J.P. Morgan predicts stringent market conditions with deficits extending to 2026.
- 03Copper price target approaches $11,250/mt, reflecting tightening fundamentals.
- 04Monitor copper-related markets for spillover effects on global trade dynamics.
Market implications
Traders should keep an eye on copper price movements, particularly approaching the $11,250/mt threshold, as this market tightens further. Observing variations in copper futures will provide critical insight into institutional positioning and broader commodity trends.
Risks to this view
A significant rebound in supply from key mining operations or a rapid recovery in global production levels could counteract the current bullish outlook. Additionally, any shifts in macroeconomic conditions that dampen industrial demand could undermine price growth in the copper market.
Hello, and welcome to this Commodities episode of At Any Rate. I'm Greg Scheer, Head of Base and Precious Metals Research at J.P. Morgan.
Copper markets were jolted this week on a bigger-than-expected disruption at the Grasberg mine in Indonesia. Grasberg, which is owned by Freeport, essentially produces around 3% of the world's copper and is the world's second-largest copper mine. What had happened following a tragic mud rush incident on the 8th of September was that Grasberg had been suspended, but the market really wasn't sure what to expect in terms of disruption.
But on the 24th of September, Freeport gave an update, which significantly increased the expectation for disruption both into the fourth quarter of 2025 and 2026. This well-exceeded market expectations, and we saw copper prices jolt from something just below around $10,000 per metric ton up to a peak at that time of around $10,350 per metric ton. Essentially what we see is that there's going to be a much longer and prolonged outage than what the market was expecting.
This comes in, importantly, to a copper market that was already largely balanced, so we weren't running any significant surpluses or deficits. What this accounts to is something around a 200,000 metric ton expected disruption in the fourth quarter of 2025 alone, when Freeport expects that their sales of both copper and gold will be insignificant. But also, when we look to 2026, a long ramp-up of production that is expected after the mine gets cleared following the landfall incident amounts to something around another 270 KMT of lost expected production.
What this does to our balances is quite significant in copper. Essentially, if we think about it, we started the year expecting global copper mine supply growth to come in at around 2% growth. Already by the middle of this year, that had fallen to close to 0% after some pretty significant disruptions at Kamokula, as well as broader struggle across operations that had eroded supply growth.
With the addition of Grasberg's significant disruption at the end of this year, that mine supply growth estimate has actually flipped to a contraction of about 0.5%, which is quite significant in already supply-constrained copper. More impactful to the balance, it's basically flipped both our 2025 and 2026 refined copper market from a modest surplus to balance market to a deficit of this year about 135,000 metric tons, and next year approaching around 180,000 metric ton deficit. These are pretty sizable deficits, and if we look at 2026, that would be the largest deficit that we've seen since 2022.
When we think about what this really means, we need to understand and contextualize why this is important. Essentially, when we look at the LME inventories of copper, they're running very, very lean. At the moment, they only sit at about 145,000 metric tons.
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