Copper Slides 8% from August Highs Despite Supply Deficits
Copper trades near $6.30 per pound, down 8% from its August peak. Supply constraints persist as mine output falls and AI demand rises.
Copper prices stand at $6.30 per pound on Tuesday. This represents a decline of nearly 8% from the record set in early August. The metal recorded its first weekly loss since June. This price action follows a recent rally that stalled abruptly.
Economist Steve Hanke advised clients to maintain long positions on September 9. This recommendation came before the market peaked. The fundamental supply outlook supporting his view has remained unchanged. Mine output is shrinking for the first time since 2017.
Mine Output Falls for First Time Since 2017
Global mine production dropped 1.1% in the first half of 2026. Data from the International Copper Study Group confirms this decline. Freeport-McMoRan operates its Grasberg mine in Indonesia at roughly half capacity. A fatal landslide has disrupted operations at this site.
Freeport-McMoRan cut its 2026 copper guidance from 1 billion pounds to 700 million. Full output is not expected before early 2028. Chile reduced its national production forecast by 2.6% for the second consecutive quarter. These two producers account for the majority of the global shortfall.
Geology and Operational Issues Constrain Supply
Average ore grades have declined from 1.6% in 1990 to below 0.6%. Many major mines now process significantly more rock to extract the same amount of metal. This geological trend forces producers to increase operational costs. It directly reduces the efficiency of global supply.
These factors pushed copper prices to a record above $14,600 per ton earlier this month. The supply squeeze mirrors trends seen in other commodities. Similar dynamics drove the recent rally in sugar prices. The physical market remains tight despite the recent price correction.
AI Demand Drives Divergent Market Forecasts
Artificial intelligence data centers create new demand for copper. One megawatt of capacity requires 60 to 75 tons of metal. Analysts estimate AI facilities will add 475,000 tons of demand this year. This structural shift alters the long-term balance of the market.
Forecasts for the supply deficit vary widely among institutions. Morgan Stanley projects a 600,000-ton deficit. JPMorgan estimates a gap of 330,000 tons. The ICSG places the deficit closer to 150,000 tons. Goldman Sachs warns that manufacturers may switch to aluminum if copper remains expensive.
