The biggest determinant of the copper price center is supply. Every second half of a supply cycle corresponds to copper completing an upward shift in its center. It is the supply cycle that contains the truly major opportunities for copper prices.

Weak traditional demand was once mistaken as a potential risk for copper price declines, but in reality, traditional demand is soft, new demand has not yet been sufficient to replace it, and a new wave of copper mine supply is difficult to expand on a large scale. This has created the current phase of inelastic copper mine supply, which is precisely the root cause of this round of copper price decoupling.

Why traditional copper price analysis falls short

Traditional copper price analysis often starts from global manufacturing, real estate, or inventory cycles. This framework can explain short-cycle fluctuations in copper prices (3-5 years), but it struggles to explain a more important question: why the same demand growth rate corresponds to completely different copper price levels in different periods. CITIC Securities attempts to analyze the impact of supply curve changes on the copper price center from the longer-spanning mine capital expenditure-capacity cycle, and thereby explain why this round of copper prices has exceeded the traditional demand cycle and shown extremely strong price performance.

Four supply cycles since WWII, with copper prices fluctuating around a moving center

Observing copper mine growth rates since 1900, one can see that global copper mine output growth from 1900 to 1950 was far more volatile than after 1950. After World War II, copper mine development gradually shifted further from high-grade ore bodies to large low-grade porphyry copper deposits, and capital deepening changed the supply response mechanism. Therefore, CITIC Securities chose 1950 as the starting point for studying modern copper mine supply cycles, not simply to avoid the more dramatic supply fluctuations before that, but because mine copper growth rates before and after 1950 have different economic meanings: earlier changes more reflected short-cycle quantity adjustments caused by war, depression, and the opening and closing of existing capacity; afterward, with capital deepening in large mines and the spread of global resource centers, mine copper growth increasingly became a lagged result of the previous round of price and capital expenditure decisions.

Using the compound growth rate of global mine copper output to measure the intensity of supply release, one can observe four supply release cycles in global copper mines from the 1950s to the present. Historically, when the 5-year CAGR continued to rise above 4%-5% and repeatedly reached or exceeded 5% within a phase, it usually corresponded to large projects formed by the previous round of capital expenditure entering a concentrated delivery period, which we define as a "strong supply release phase"; when the 5-year CAGR continued to fall from a high level and entered around 2%, it meant that the earlier project pipeline was gradually being depleted and supply re-entered a low-elasticity state.

The first supply cycle was 1955-1968 (14 years), of which 1955-1964 (10 years) was the strong supply release phase, with mine output CAGR reaching 4.9%; 1965-1968 (4 years) was the weak supply phase, with mine output CAGR falling to 1.7%. The second supply cycle was 1969-1994 (25 years), of which 1969-1974 (5 years) was the strong supply release phase, with mine output CAGR reaching 4.5%; 1975-1994 (20 years) was the weak supply phase, with mine output CAGR falling to 1.8%. The third supply cycle was 1995-2011 (17 years), of which 1995-2001 (7 years) was the strong supply release phase, with mine output CAGR reaching 5.2%; 2002-2011 (10 years) was the weak supply phase, with mine output CAGR falling to 1.9%. The fourth supply cycle is 2012-present (15+ years), of which 2012-2016 (5 years) was the strong supply release phase, with mine output CAGR reaching 5.2%; 2017-2026F (9 years) turned to weak supply, with mine output CAGR falling to 1.8%.

Corresponding to price performance, the long-term behavior of copper prices is not repeated fluctuation around a fixed average, but rather a pattern of continuously breaking away from old platforms and forming new price ranges as supply cycles switch. Through detailed review, we further break down why, after each strong supply release ends, the next round of copper prices often does not simply return to the original average but instead enters a higher platform.

First supply cycle: policy-driven large-scale development of traditional resources (1955-1964)

The first strong supply release was not driven purely by market prices. Instead, the U.S. government actively reduced the investment and sales risks of copper resource development through strategic reserves, financing support, and procurement guarantees. The Korean War and early Cold War industrial mobilization further strengthened America's strategic resource security demands. The 1946 Strategic and Critical Materials Stock Piling Act established reserve targets and a government procurement framework; the 1950 Defense Production Act further supported expanding or maintaining capacity at producing, suspended, and marginal mines through government loans, long-term procurement contracts, and tax amortization incentives. Together, these two types of policies translated national security needs into investment conditions for mine projects.

The copper mine development model behind the new supply in 1955-1964 still mainly focused on expansion, reopening, and development of known ore bodies within traditional mining areas. Regionally, three major incremental centers formed: the Central-Southern African Copperbelt, North American mining areas, and the Chile-Peru Andean copper belt. The Soviet Union and Eastern Europe were also important incremental sources in the same period. Global copper mine output increased from 2.9 million tonnes in 1955 to 4.443 million tonnes in 1964, a cumulative increase of about 1.54 million tonnes.

North America was the region most directly supported by U.S. policy, with policy support directly affecting domestic marginal mines and low-grade ore bodies. Increments outside North America mainly came from the Zambia-Congo Copperbelt promoted by Western mining capital and large projects in Chile and Peru. The Soviet Union and Eastern Europe were also important expansion centers. From 1955 to 1964, the Soviet Union and Eastern Europe contributed about 384,000 tonnes, representing independent expansion under the socialist industrialization system.

Supply release first pushed prices down, and the price decline in 1957-1958 was highly consistent with the first round of capacity release. The supply dividend was absorbed by demand, and the pricing center of copper prices gradually shifted from new capacity to marginal supply disruptions, with the price center moving upward. In 1964, as postwar industrialization continued, earlier capacity was gradually absorbed, copper prices regained conditions for an increase, and the cycle reached a turning point. Global mine copper output rose from 4.443 million tonnes in 1964 to 5.01 million tonnes in 1968, with a CAGR of about 3%, slower than 5.3% in 1955-1964; slower supply growth and rising production costs limited further price declines.

After the supply cycle turned from strong to weak, the pricing focus of copper prices gradually shifted to marginal supply disruptions. The impact of strikes and transportation risks on effective supply expanded from local events into market shortages, while high copper prices themselves reinforced labor distribution demands and resource-nationalist pressures. The median nominal price from 1965 to 1974 was about $1,090 per tonne, significantly higher than $683 per tonne from 1955 to 1964.

Second supply cycle: high prices drive global resource expansion (1969-1974)

The second round of supply expansion was driven jointly by high prices and resource security: after the idle supply formed in the first round was absorbed by industrialization demand, inventory buffers declined, and the market began to pay higher premiums for new resources and supply interruptions. In the latter half of the 1960s, demand from power grids, automobiles, construction, home appliances, and industrial equipment continued, and earlier excess supply rapidly converged. U.S. strategic copper reserves fell from about 1.036 million tonnes at the end of 1963 to about 250,000 tonnes in 1967, significantly reducing the supply buffer available to consuming countries. After the 1971 "Nixon Shock," the Bretton Woods system began to collapse in substance and formally ended in 1973 when major currencies shifted to floating exchange rates. At that time, dollar depreciation, inflation, and the financialization premium on physical inventory were also important backgrounds for understanding asset pricing.

New supply in 1969-1974 shifted further toward global greenfield, low-grade, and large-tonnage resources. Regionally, the resource frontier expanded from traditional mining areas such as the southwestern United States further to Canada, the Andes, Southeast Asia, Africa, and Oceania, and required integrated construction of mines, concentrators, smelters, energy, and transportation systems. Global mine copper output rose from 5.682 million tonnes in 1969 to 7.097 million tonnes in 1974, an increase of about 1.415 million tonnes over five years.

Western Canada and new mining areas around the Pacific Rim were the core increments for market economies. Chile (Andes) and Zaire (now the Democratic Republic of the Congo) provided expansion increments from traditional producing areas. Non-market economies such as the Soviet Union and Poland also contributed significantly. The Soviet Union and Poland together contributed about 310,000 tonnes of net increase, of which Soviet mine output rose by 171,000 tonnes and Poland by 139,000 tonnes.

Compared with 1955-1964, the copper mine development model in 1967-1974 shifted further from expansion, reopening, and known ore body development within traditional mining areas toward global greenfield, low-grade, and large-tonnage resources, and the supply cycle ended later than the price cycle. Inflation and monetary factors pushed up nominal prices. 1969-1974 was the only phase among the four strong supply release periods in which copper prices rose significantly at the same time.

1973-1974 was not an independent copper market move, but a broad rise in global commodity prices: after the collapse of the Bretton Woods system, the dollar depreciated, and demand for inflation hedging through physical assets increased. The World Bank later explicitly pointed out that copper prices continued to rise in early 1974 despite a clear increase in production, reflecting the influence of market expectations and speculative forces.

Two demand recessions (1975 and 1982) extended the inventory digestion cycle, delaying the upward shift in the price center. After 1987, the triple buffers of inventories, idle capacity, and new projects weakened simultaneously, and the price center truly moved upward. After supply growth weakened in 1974, copper prices did not immediately begin a trend rise, but a new nominal price floor had already been confirmed. Global mine copper output rose from 7.097 million tonnes in 1974 to 8.319 million tonnes in 1986, with a CAGR of only about 1.3%, markedly slower than 5.9% in 1969-1974; slower supply growth and rising production costs limited further price declines. However, the two demand recessions in 1975 and 1982 delayed inventory destocking, and copper prices fluctuated near the new bottom for a long time. By the end of 1986, inventories had fallen to less than half of the 1983 peak.

In 1987, global commercial inventories fell further from about 890,000 tonnes to 520,000 tonnes; copper consumption in the same period was about 10.44 million tonnes, higher than production of about 10.21 million tonnes, and the market shifted from inventory surplus to a physical deficit. The average nominal copper price from 1987 to 1990 was about $2,474 per tonne, about 71% higher than $1,448 per tonne from 1982 to 1986, and stabilized near $2,450-$2,550 in 1991-1992. Only then was the new nominal price center confirmed.

Third supply cycle: Chile-led expansion and the SX-EW route

The third round was a period of strong capacity delivery formed jointly by globalization, resource openness, and technology diffusion. Project reserves formed from the late 1980s to the mid-1990s were concentrated in commissioning, expansion, and ramp-up during 1995-2001. In the 1990s, electronics, power, construction, and manufacturing supply chains shifted to East Asia, and Asia gradually became an important region for global refined copper consumption. By the late 1990s, Asia had absorbed one-third of global refined copper consumption, and demand expectations underwent structural changes.

Chile's mining opening and global capital flows laid the institutional foundation for this round of expansion. This round of new supply was dominated by large Chilean porphyry mines, supplemented by large projects in Australia, Indonesia, Argentina, and Peru; SX-EW also brought oxide ores, low-grade ores, and waste rock into the set of economically developable resources. Global mine copper output rose from 10.07 million tonnes in 1995 to 13.636 million tonnes in 2001, an increase of about 3.566 million tonnes over six years, with a CAGR of about 5.2%, the largest concentrated release after the previous two rounds.

The southern Andes in South America was the absolute core, with Chile alone contributing about 60% of the global net increase. At the project level, SX-EW reduced the dependence of some projects on traditional smelting-refining links, allowing cathode copper to be produced directly from oxide ore and waste rock leaching resources and shortening processes for some projects. However, its significance was mainly to expand the resource frontier, and it did not mean that unit capital and operating costs for all projects would necessarily be lower.

After 2001, the contraction of the supply project pipeline and accelerating Chinese demand overlapped during 2002-2011, shifting the copper market from "overcapacity and price suppression" to "inelastic supply and price center revaluation." After the previous concentrated commissioning ended, global copper mine supply did not immediately stop growing, but its growth rate fell markedly. Low copper prices in 1997-2001 compressed exploration budgets and greenfield project investment, and some high-cost projects were delayed or canceled. Because large copper mines usually require years from exploration, approval, and financing to construction and commissioning, the project gap formed during the low-price period gradually began to appear as insufficient new supply around 2003.

Global mine copper output rose from about 13.6 million tonnes in 2002 to about 16.1 million tonnes in 2011, with a CAGR of about 1.9%, significantly lower than the 5.2% compound growth rate in 1995-2001. Global refined copper usage rose from about 15.3 million tonnes to 19.9 million tonnes over the same period, with a CAGR of about 3.0%, and China became the core of this round of demand growth. After joining the WTO, export manufacturing, home appliances, machinery, and electronics industries expanded rapidly; at the same time, urbanization, housing construction, power grid investment, and transportation infrastructure significantly increased the copper consumption intensity per unit of economic growth. The median copper price from 2002 to 2011 was about $5,936 per tonne, about 227% higher than about $1,814 per tonne from 1995 to 2001, roughly triple the previous phase.

Fourth supply cycle: super-cycle CAPEX (2012-2016)

The fourth round of strong supply release was the historic-level capital expenditure triggered by the copper price rise and Chinese demand shock in 2002-2011, delivered in concentrated form during 2012-2016. China's own copper resources and mine output could not keep pace with demand, and new consumption increasingly relied on imports of overseas mines, copper concentrate, refined copper, and scrap copper. By around 2011, China's copper consumption accounted for about 40% of the world total, and its refined copper imports were equivalent to about 40% of global refined copper trade. In the same period, China's investment as a share of GDP rose from 35% in 1980 to 49% in 2010, infrastructure and manufacturing accounted for about 27% and 31% of fixed asset investment respectively, and residential investment as a share of GDP rose from about 5.5% in 2004 to about 9% in 2011. As a result, mining companies no longer viewed Chinese demand as an ordinary cyclical recovery, but incorporated it into long-term demand forecasts and accordingly raised copper price assumptions and market capacity expectations over project lifespans.

Driven jointly by demand expectations, copper prices, and financing conditions, global copper mine development capital expenditure entered a historic high. This round of global supply was more geographically dispersed, and its absolute increment was the largest of the four rounds, but in resource type it still relied heavily on large sulfide ore and copper concentrate systems, becoming more complex in capital and execution terms. Regionally, Peru became the largest project-based incremental center, Mongolia formed a new large resource center, Mexico and the United States contributed increments through brownfield expansion, the African Copperbelt provided supplementation, and new projects in Chile were mainly used to offset depletion at mature mines.

After the supply peak was digested after 2017, the greenfield project gap and structural demand took over, pushing the price floor upward again. After 2017, new projects did not completely disappear, but were more often scattered commissioning and long ramp-ups of a small number of projects, not forming the concentrated supply release seen in 2012-2016. Brownfield expansion was prioritized over greenfield development, and miners placed greater emphasis on balance sheet repair and maintenance of existing mines during the low-price phase; at the same time, declining mine grades, rising equipment and energy costs, and longer permitting, environmental, and community consultation cycles made it harder for high prices to quickly translate into new effective supply. The CAGR of global mine copper output from 2017 to 2020 fell to about 1.1%, down about 4.1 percentage points from 2012-2016. The nominal copper price center from 2017 to 2020 was about $6,221 per tonne, and prices gradually bottomed, but even the low nominal price percentile did not return to the lows before 2016.

After 2020, structural demand took over and continued to call on high-cost resources. From 2021 to 2025, power grid investment, transportation electrification, renewable energy, and digital infrastructure gradually became new sources of marginal demand. Compared with real estate and general manufacturing, these demands have stronger planning attributes and lower short-term price elasticity. The average nominal copper price from 2021 to 2025 rose further to about $9,145 per tonne, up about 47% from 2017-2020 and about 33% higher than 2012-2016. This indicates that prices may have already broken away from the 2017-2020 platform and entered a new higher range.

Assessing whether this round of copper prices has conditions for a higher price center

The four cycles show that only when the previous round of low-cost supply expansion is gradually absorbed while demand still needs to continually call on new resources does copper have the basis to break away from the old platform. Therefore, falling supply growth is an important clue for observing price revaluation, but it cannot alone constitute a sufficient condition for a higher copper price center. Judging this change requires examining supply buffers, demand sustainability, and marginal development costs at the same time.

Condition one: the buffer formed by earlier supply expansion is gradually consumed, high prices cannot quickly bring sufficient new output, and effective supply elasticity declines. After large projects are concentrated and commissioned, a decline in mine copper growth usually means the release momentum of the earlier project pipeline weakens. Against this background, strikes, transportation disruptions, and changes in resource policy more easily amplify price volatility; only if these disruptions further delay investment or raise project return requirements can their impact shift from a short-term risk premium to a long-term supply cost. In addition, although strong supply release often suppresses copper price performance, nominal copper prices do not necessarily fall when monetary and inflation factors are considered. The experience of 1969-1974 shows that changes in the nominal copper price center in extreme cases also need to account for shocks to monetary credit.

Condition two: a sharp slowdown in demand may delay the pace of the center shift upward, and there needs to be marginal demand that continues to grow and has low price elasticity. Demand must be able to continuously absorb supply, not merely form short-term restocking. Experience from after 1974 to the mid-1980s shows that slower supply does not necessarily lead to an immediate upward shift in the price center. Recession, demand adjustment, and inventory digestion can keep the market loose for a long period. The change after 2002 was that China's industrialization and urbanization formed sustained new demand, allowing previously expanded capacity to be gradually absorbed.

Condition three: the marginal resources needed to meet new demand require higher development costs and capital returns. Technological progress and new resource centers can压低 marginal supply prices only if they continuously form low-cost increments of sufficient scale. The expansion of large Chilean mines and SX-EW in the 1990s did increase supply and improve the development economics of some resources, but it did not permanently prevent the subsequent upward shift in the copper price center. As new output was absorbed, the market still needed to develop the next batch of resources.

The core change after 2021 is that the supply slowdown after the concentrated delivery of super-cycle projects gradually overlapped with demand growth brought by power system and electrification investment. Supply-side constraints are mainly reflected in the rising difficulty of converting resources into effective output, and the global mine side has not re-formed a strong supply cycle with sustained growth of about 5%. On the demand side, weaker real estate does not necessarily mean total copper demand contracts in tandem, and structural demand has taken over with a physical investment base. Power grid construction, transportation electrification, and energy system investment provide demand sources different from the traditional real estate cycle. In its 2025 report, the IEA pointed out that China's power grid investment expansion was the largest single contributor to global copper demand growth over the previous two years. This means that demand has taken over with a physical investment base, rather than relying entirely on long-term narratives. 2017 was the point when the necessary conditions for an upward shift in the copper price center began to form, and after 2021 was the stage when sufficient evidence clearly strengthened. Weaker supply explains why prices struggle to return to old lows, structural demand determines whether prices can break away from the old platform, and higher marginal incentive costs determine the height and sustainability of the new price platform.