Copper's Longest Rally Since 1994 Collides With a Shrinking Supply Chain

Copper is experiencing its longest rally since 1994, with physical market supply dwindling. The London Metal Exchange's benchmark prices hit a 10-week high of $14,300 a ton, nearing the record $14,527.50 set in January. Comex prices reached a fresh all-time high of $6.70 a pound in August. Inventory levels have shrunk, falling for 42 consecutive days by mid-August, and only about half remains, earmarked for withdrawal.

The Grasberg mine disaster in Indonesia on September 8, 2025, released 800,000 tons of copper, halting a force majeure situation still impacting supply. Global mine output fell 1.1% in the first half of the year, with Chile, the top producer, cutting its 2026 forecast to a 2.6% decline. Chile's Andes Norte expansion at El Teniente, designed to offset losses, won't start producing until 2029.

Declining grades at existing operations and old assets are contributing factors. In August, Congo banned copper and cobalt concentrate exports, pushing LME prices up by 1.8%. Wall Street is divided on the severity of the supply issue, with some predicting copper prices could reach $15,000 to $17,000 a ton due to AI-driven demand or manufacturing rebound.