Copper prices have repeatedly set record highs over the past year, driven largely by tariff-related trade flows. Now, investors are betting that nearly stagnant mine production growth will push prices even higher. A series of disappointing production data so far this year is shaking expectations that global copper mine supply would at least grow modestly.

According to the International Copper Study Group (ICSG), global copper mine output fell 1.1% in the first half of the year, with both Codelco and Freeport-McMoRan recording double-digit production declines. Morgan Stanley, which initially forecast supply growth at the start of the year, now expects output to remain roughly flat or decline slightly, potentially marking the first annual drop in global copper mine production since 2017.

Copper prices at record highs should theoretically incentivize miners to boost output. However, declining ore grades, frequent accidents, project setbacks, and extreme weather are hindering production increases, intensifying concerns about whether copper supply can keep pace with demand as electrification accelerates in the coming years.

Currently, there is no shortage of refined copper globally. Speculation that the U.S. may impose tariffs on refined copper imports has driven unprecedented volumes of copper into U.S. warehouses, while supply in other regions has tightened. This trade flow distortion may prove temporary, but constraints on mine supply are not, and bulls are betting that limited supply will ultimately continue to lift copper prices.

Evy Hambro, Global Head of Thematic and Sector Investing at BlackRock, said in an interview last month that miners' difficulty in increasing output is the fundamental reason the copper market is "extremely, extremely tight." He pointed to declining grades at existing mines, severe asset aging, and a lack of new supply projects coming online.

Chile, the world's largest copper producer, posted its lowest second-quarter output in at least 19 years and cut its full-year production forecast for a second consecutive quarter, now projecting a 2.6% decline for the year. Codelco has warned that even its modest output growth target may be difficult to achieve this year.