Copper Mine Supply Set for First Fall Since 2017 as Grades and Chile Output Bite

Sprott Asset Management says global mined copper production could fall this year for the first time in nearly a decade even after prices hit records, because disruptions, declining grades and weak Chilean output expose how slowly miners can respond to higher prices. Mine output fell 1.1 percent year on year in the first half of 2026, and outages at Freeport-McMoRan's Grasberg complex in Indonesia and Ivanhoe Mines' Kamoa-Kakula in the Democratic Republic of Congo removed an estimated 600,000 tonnes of expected 2026 production. That is equal to about 2.5 percent of annual global mine supply. The LME spot copper price rose 4.4 percent in August and 16 percent over the first eight months of the year, while the Nasdaq Sprott Copper Miners Index gained 17 percent in August and 31 percent year to date.

Chile, which accounted for about 23 percent of world mine production last year, is the biggest weak point. Output fell 6.6 percent in the first half and 9.4 percent year on year in July. State copper commission Cochilco cut its 2026 production forecast to 5.27 million tonnes, 2.6 percent below last year, citing exceptionally low first-half output from Codelco, Escondida and Spence. Codelco abandoned its 2026 target in August after a fatal accident at El Teniente, where development of the Andes Norte section could remain suspended for as long as two years. Antofagasta and Lundin Mining cut their 2026 forecasts in August, removing a combined 35,000 to 55,000 tonnes, and BHP expects Escondida output to fall to 1.0-1.1 million tonnes in fiscal 2027 from 1.26 million tonnes as feed grades decline.

Mine tightness does not mean the refined market is in deficit. International Copper Study Group data show refined production rose 2.4 percent in the first half while apparent use gained 2.3 percent, leaving a preliminary 131,000 tonne surplus, or 98,000 tonnes after adjusting for Chinese bonded stocks. Location now matters more than the headline balance: US cathode imports surged to a record 223,000 tonnes in July against a typical pre-2024 July range of 37,000 to 80,000 tonnes, and COMEX inventories rose 712 percent between February 2025 and August 2026 while stocks in London and Shanghai fell. The US Commerce Department has recommended duties of 15 percent from January 2027 and 30 percent from 2028, subject to a presidential decision, which keeps metal parked in the United States.

Near-term pricing reflects that pull and tug. Copper steadied near a three-week low on 15 September, with LME three-month metal up 0.10 percent at 14,014.50 dollars a tonne after touching 13,958 dollars on Monday, while the most-traded Shanghai contract closed 1.07 percent lower at 107,030 yuan. Lower prices drew physical buying back into China and the Yangshan import premium rose to 100 dollars a tonne, the highest since mid-August. At the same time LME-registered stocks jumped 3.59 percent to 242,900 tonnes and the cash contract traded at a discount of about 67.50 dollars to the three-month, which ING analysts said suggests extreme LME tightness is beginning to moderate.

Nickel tells a similar story of policy running ahead of fundamentals. LME nickel has slipped back to around 16,500 dollars a tonne from a May high of 20,000 dollars as the market loses confidence that Jakarta can enforce its quota cuts from 379 million tonnes to 250-260 million tonnes. Combined LME and Shanghai Futures Exchange refined nickel stocks stand at 478,000 tonnes, enough to supply the global market for about seven weeks, and China imported 170,000 tonnes of refined nickel in the first seven months, up 28 percent year on year and the fastest pace since 2016.