Copper is finding itself in the sweet spot between intensifying demand and a stagnant supply response.
Demand for the metal has remained resilient despite broader macroeconomic headwinds, supported by growing investment in energy security and infrastructure.
This helps explain why copper has outperformed gold over the past year, with the latter lacking the same industrial demand boost. Prices recently reached an all-time high of US$14,850 ($20,630) per tonne in London.
A new report by Sprott highlights copper’s resilience even as economic signals from China, the world’s largest consumer, remain mixed. Prices have surged to record highs, increasingly diverging from the traditional industrial cycle.
Sprott analyst Jacob White says this reflects a “structural shift in copper’s demand profile” beyond its traditional links to construction, manufacturing, and consumer activity.
Today, demand is increasingly being driven by the rapid buildout of electricity networks, artificial intelligence data centres, defence systems, and energy infrastructure.
“These sources of demand are supported by government policy, national security priorities, and long-term infrastructure investment, making them generally less sensitive to short-term economic conditions,” White says.
Mine supply struggles
The supply side provides an even clearer picture of where the copper market could be heading.
According to Sprott’s analysis, production constraints are emerging across multiple stages of the copper value chain, beginning at the mine level.
Mine production continues to underperform expectations. CRU Group now sees the global copper market as “at balance at best” this year, according to Reuters, having previously forecast a 639,000-tonne surplus.
Chile has also lowered its copper production forecasts after first-half output fell to its lowest level since 2018. The world’s largest copper-producing country now expects output to decline in 2026 before recovering next year, with both forecasts reduced meaningfully from previous estimates.
The weakness goes beyond temporary maintenance and operational disruptions. Much of Chile’s major copper capacity was developed decades ago, leaving key operations dealing with declining ore grades, ageing infrastructure, water constraints, and increasingly complex investment requirements.
National production remains below its 2018 peak and would still fall short of that level even if the revised recovery forecast is achieved, according to Sprott.
Similar challenges are emerging elsewhere. The firm notes that mine disruptions exceeded their long-term average in both 2024 and 2025, while recoveries at major operations including Grasberg and Kamoa-Kakula have taken longer than expected.
The market therefore needs Chilean production to recover, disrupted mines to return, and operating performance elsewhere to normalise simply to deliver supply already embedded in forecasts.
“Higher copper prices should encourage investment, but major mines can take 15 to 20 years to develop and require substantial capital,” Sprott’s White writes.
“Much of the visible project pipeline is also needed simply to replace declining production at existing operations before it can generate meaningful net supply growth.”
Power shifts towards miners
Tightening concentrate supply is also shifting bargaining power towards copper miners.
Treatment charges (TCs) — the fees miners traditionally pay smelters to process copper concentrate into refined metal — have moved deep into negative territory.
Sprott notes that TCs stood at around US$90 per tonne in 2023. Today, the situation has effectively reversed, with smelters paying miners around US$150 per tonne to secure concentrate.
“This extraordinary shift illustrates how decisively bargaining power has moved toward miners and provides a clearer indication of upstream scarcity than record-high refined copper prices alone,” White says.
Tariff overhang
At the same time, uncertainty surrounding potential US tariffs has redirected refined copper into the American market, where prices have repeatedly reached record highs as traders pursue arbitrage opportunities.
As US copper inventories build, stockpiles elsewhere have been depleted, particularly those held in London Metal Exchange warehouses.
Sprott points out that some copper could eventually return to international markets once trade flows normalise. However, greater policy clarity cannot increase mine production, reverse declining ore grades, or accelerate projects that can take more than a decade to develop.
In other words, tariff uncertainty has amplified and regionalised the copper shortage, but it has not created the underlying scarcity.
Another supply chain pressure
Adding another layer of complexity is sulphuric acid, an important input for certain copper operations.
Sulphur supply was severely disrupted by the war in the Middle East, a region responsible for nearly half of global sulphur trade. Measures subsequently taken by other major exporters, including China, have added further pressure to acid prices.
According to Sprott, this is having opposing effects across the copper supply chain.
Higher acid prices increase costs and supply risks for solvent extraction and electrowinning operations that consume sulphuric acid. At the same time, they improve the economics of smelters that produce the acid as a by-product.
Combined with elevated gold and silver prices, stronger by-product revenues have allowed many smelters to remain profitable and continue competing aggressively for scarce copper concentrate despite deeply negative TCs.
That has delayed the production cuts that might otherwise reduce competition for concentrate and allow treatment charges to recover.
Miners reap the benefits
For copper miners, the combination is particularly favourable.
Smelters are offering increasingly attractive terms to secure scarce concentrate at the same time that refined copper prices are trading around record highs.
As Sprott puts it, these conditions “have pushed copper miners’ all-in sustaining cost margins to levels not seen in decades”.
The resulting margin expansion highlights the operating leverage available to miners. Once operating costs are covered, increases in copper prices can flow disproportionately into earnings and cash flow.
Historically, that leverage has allowed copper miners to outperform the underlying metal during sustained bull markets, particularly when high copper prices coincide with favourable concentrate terms and strong by-product revenues.
Copper miners in focus
Against this backdrop, Sprott sees copper miners as one way for investors to gain leveraged exposure to the widening imbalance between supply and demand.
As of 10 August, copper miners had gained 12.96% month to date, while junior copper miners had risen 15.06%, according to the report.
Sprott says the acceleration suggests investors may be looking beyond short-term copper price volatility and focusing on the earnings leverage available to producers if prices remain historically elevated.
“We believe pure-play copper miners provide more direct exposure to copper’s constrained supply response and the resulting margin expansion, positioning them to benefit disproportionately if these conditions persist,” White writes.
While many of the world’s largest diversified miners produce significant amounts of copper, pure-play exposure remains relatively limited and often geographically concentrated.
One US-focused company fitting that profile is Gunnison Copper (TSX:GCU), which produced its first pure copper cathode at the Johnson Camp Mine in Arizona around a year ago.
The company is also developing a large open-pit project in the state that it expects could anchor a vertically integrated copper operation for more than two decades.
Elsewhere in the US, exploration is ramping up across established mining jurisdictions.
In Nevada, Copper One Resources (CSE:CEXY) is advancing its district-scale Majuba Hill Project, which historically produced 2.8 million pounds of copper. The company is drilling to further define mineralisation and advance the project towards a resource estimate.
Canada’s copper hunt
The search for new copper discoveries is also gathering pace in Canada, particularly around established mining districts.
In British Columbia, Canada One Mining (TSX-V:CONE) has assembled a large land package near Hudbay Minerals’ (TSX:HBM) Copper Mountain Mine and sees potential for a similar porphyry-style copper system.
Kodiak Copper (TSX-V:KDK) is also exploring a district-scale property in British Columbia’s Quesnel Terrane, where the geology shares similarities with Copper Mountain.
Copper Mountain ranks among Canada’s largest copper operations, with estimated average annual production of around 45,000 tonnes over the next decade. Hudbay also plans to expand the operation, potentially increasing copper production by approximately 90%.
With demand increasingly tied to long-term infrastructure and energy investment while mine supply struggles to respond, the copper market is showing signs of a structural imbalance — one that could increasingly favour miners capable of bringing new metal to market.
Write to Jackson Chen at Mining.com.au
Images: Sprott & Pixabay
