Macquarie says copper price rally still running ahead of reality

Copper was last trading at $6.27 a pound on Thursday, equal to a little over $13,800 a tonne and up 2.6% by lunchtime in New York. Copper prices were buoyed by a fall in the oil price after Trump said Iran is back at the negotiating table and fresh tariff threats in the US. Just the Commerce Department said it plans to create a process for expanding tariffs of up to 50% to a wider range of downstream copper products by the end of the 2026 fiscal year.

In a new commodities compendium, Macquarie Strategy argues that copper remains caught between bullish investor sentiment and weakening physical fundamentals and at today’s levels the gap is wide.

The bank’s analysts in locations including London, Shanghai and Singapore in a brief called Spinning Plates to describe the current state of the market argue that the world is not short of copper and with surpluses expected over the next few years is unlikely to run out any time soon.

Visible stocks have risen by more than 870,000 tonnes since the start of 2025, with 444,000 tonnes added last year and a further 429,000 tonnes so far in 2026. LME inventories are at eight-year highs, Comex stocks are at unprecedented levels and Macquarie estimates another 550,000 tonnes is sitting off-exchange in the US.

Copper rallied from below $12,000 a tonne in late March to over well over $14,000 at the end of May before easing back. Macquarie says the move was driven more by positioning, short-covering and tariff-related trade flows than by physical tightness.

Metal has been pulled across the Atlantic by the CME-LME arbitrage as traders position around possible US copper trade measures. Macquarie says the most likely outcome is continued uncertainty rather than a clean near-term resolution, keeping metal in the US and leaving the rest of the market with an artificial sense of tightness.

Macquarie Strategy sees Chinese buyers stepping back at these high prices. China has seen a large seasonal stock build despite lower imports and higher exports, and the usual drawdown stalled early. Outside China, demand is also soft, with spot premiums well below annual contract levels.

Mine supply continues to underperform, with guidance from the 17 largest miners cut by 199,000 tonnes to 13.8 million tonnes. The largest disruptions came from Kamoa-Kakula and Grasberg, where recovery and ramp-up schedules have moved out. Ivanhoe said this week its DRC mine output will ramp in the second half of the year but kept 2026 production guidance at 290,000–330,000 (down from expectations of more than 500,000 tonnes before the May 2025 flooding). Freeport-McMoRan once targeted 771,000 tonnes of copper at Grasberg this year before the mud rush. The Phoenix-based company now expects to return to full production by end-2027.

With Kamoa-Kakula and Grasberg baked into its disruption allowance, Macquarie forecasts mine supply growth of 1.3% this year and 4.4% in 2027. It also assumes Cobre Panama restarts in the second quarter of 2027 (a timeline that would disappoint some observers of First Quantum’s ordeal in the central American nation) and ramps up over six months to 385,000 tonnes a year.

Macquarie has cut its global copper demand growth forecast for 2026 to 1.8% from 2.0%. China was reduced to 1.1%, while ex-China growth was cut to 2.6%. The bank expects demand growth to improve to 2.2% in 2027 as ex-China markets recover, but China remains a drag because of its moribund property market.

Macquarie is also sceptical about near-term AI-driven copper demand. Data centres are fuelling bullish sentiment, but project delays due to growing public opposition, grid constraints, equipment shortages and growing use of optical connectivity mean the copper impact may be smaller and slower than the market assumes.

The bank still sees copper as structurally attractive in the long run. It forecasts mine supply growth of 2.8% a year from 2025 to 2030 and refined production growth of 2.4%, against demand growth of 2.8%, driven by electrification and the energy transition. By 2030, the market should move back toward balance, meaning new projects will still be needed.

The near-term problem is the surplus. Macquarie estimates the market was already in a 600,000-tonne surplus last year and expects another 262,000-tonne surplus in 2026, even after allowing for 783,000 tonnes of disruptions. In 2027 and 2028, it expects the surplus to average more than 700,000 tonnes a year.

Macquarie has lifted its average 2026 copper price forecast to $13,165 a tonne from $12,310 a tonne, reflecting price momentum and macro support. But the bank still expects the market to correct, forecasting a price floor of $11,000 a tonne in the third quarter of 2027. It also raised its long-term copper price forecast to $10,200 a tonne in 2025 dollar terms.