Copper Supply Faces First Annual Decline Since 2017

Three-month copper prices on the London Metal Exchange reached $14,779 per ton on Tuesday. New York futures crossed $3.74 per pound. The metal is up 24% this year and 51% over the past 12 months. This performance outpaced the Magnificent Seven tech stocks.

Market participants often cite U.S. tariff speculation as the primary driver. However, Frank Holmes of U.S. Global Investors argues that structural supply constraints are the true cause. He points to weakening global mine output and a historic slowdown in new discoveries.

Tariff theory fails current data

The U.S. Commerce Department proposed a 15% duty on refined copper imports for 2027. This rate is set to rise to 30% in 2028. Traders have moved 225,094 tons into U.S. warehouses in July alone.

A genuine tariff trade typically creates a large price premium in New York relative to London. Last July, the COMEX premium averaged 23% over LME prices. It touched 30% at its peak. Currently, the annual average premium is only 1%.

In February and March, New York prices actually traded at a discount to London. The current spread is roughly $148 per ton. This flat arbitrage suggests that tariff expectations are not driving the current price surge.

Global production hits multi-year low

The International Copper Study Group reports global mine production fell 1.1% in the first half of 2026. Output declined in Chile, Indonesia, and the Democratic Republic of Congo. Chile produced its weakest second quarter in 19 years.

Chile accounts for nearly a quarter of global supply. The country cut its full-year forecast for the second consecutive quarter. It now guides to a 2.6% annual decline. Codelco and Freeport-McMoRan both reported double-digit production drops.

Morgan Stanley initially expected mine supply to expand this year. It now projects production will run flat or slightly lower. This would mark the first annual decline in global copper mine supply since 2017.

Discovery costs rise sharply

S&P Global Market Intelligence tracks major copper discoveries back to 1990. The industry has found 263 significant deposits holding 1.4 billion tons. The 1990s alone yielded 714.8 million tons.