Multiple positive factors are driving copper prices toward $14,000 per tonne again, with key drivers like falling inventories and supply disruptions expected to persist. Under a neutral scenario, copper prices could reach $15,000 per tonne this year. The copper sector is at the early stage of valuation recovery, and the formation of price hike expectations alongside improving market sentiment will continue to fuel this revaluation.
Multiple Real-World Catalysts Push Copper Prices Back Toward $14,000/Tonne
As of July 21, 2026, LME copper prices rebounded to near $14,000 per tonne, recovering 7% from the June 2026 trough of $13,000. Despite weak domestic demand in the traditional off-season (SMM forecasts domestic apparent consumption growth slowing from 4.4% in Jan-Jun to 1.0% in July) and elevated rate-hike expectations (CME FedWatch still prices in a 25bps Fed hike), copper prices have moved higher. We believe the core drivers are: 1) heightened spot tightness expectations due to low domestic inventories; 2) extreme weather disruptions to copper mine supply; and 3) speculative positioning around US refined copper import tariffs. We believe the first two factors will likely strengthen over the next quarter. While the third factor is subject to debate, the eventual outcome is likely neutral or positive. Therefore, we expect copper prices to trend higher, maintaining our neutral-case forecast that LME copper could hit $15,000 per tonne this year.
Supply-Demand Mismatch to Intensify Low Inventory Effect, Strengthening Trading Base for Copper
According to SMM, as of July 20, 2026, China's social copper inventory stood at 144,000 tonnes, a drawdown of over 500,000 tonnes from the early March peak (including over 100,000 tonnes in July alone). This is the lowest level for the same period since 2021, alongside rising spot premiums over the past week. SMM data shows domestic refined copper apparent consumption grew 4.4% in Jan-Jun, but actual supply (domestic output plus net imports) grew only 2.8%, with the mismatch reflected in the surprisingly deep destocking. SMM forecasts that while July-August apparent consumption will fall 0.6% due to seasonal weakness, actual supply will drop 3.5% due to smelter maintenance, raw material shortages, and lower imports. This intensifying mismatch could push inventories even lower, providing stronger spot support for copper prices and more elastic trading opportunities under potential positive catalysts.
Extreme Weather and Potential Production Guidance Cuts May Heighten Supply Fears
According to SMM, adverse weather in Chile, the world's largest copper producer, has impacted major mines and restricted port shipping. Several miners, including Codelco, Antofagasta, and Anglo American, have activated safety protocols and adjusted operations. Historically, periods of high ENSO deviation (El Niño episodes) are often accompanied by output declines in Chile. NOAA forecasts a near-100% probability of El Niño in H2 2026, with a 25% average chance of a very strong El Niño between September and November. Furthermore, Q1 2026 data from major global copper miners shows many achieved less than 23% of their full-year guidance, with Codelco and Freeport's output 3-5 percentage points below their 2023-2025 Q1 averages. This suggests a high probability of downward guidance revisions. As Q2 2026 data is released, potential guidance cuts could exacerbate supply concerns.
Awaiting US Copper Tariff Decision, Most Paths Remain Bullish for Copper
Bloomberg reports that the US Commerce Department submitted its copper market assessment to President Trump by end-June, with a decision on refined copper import tariffs pending. As noted in our June 2, 2026 report, the emergence of "transactional" inventory hoarding (COMEX stockpiling) can galvanize the copper sector, while "precautionary" inventory hoarding (hidden stockpiling) provides solid fundamental support. We believe most conceivable tariff scenarios remain positive for copper: 1) If the most anticipated plan (phased tariffs from 2027) is implemented, H2 2026, especially Q3, would become a late window for overseas stockpiling, creating high-intensity, high-velocity demand for both transactional and precautionary hoarding, boosting copper's upside. 2) If the decision is delayed again, as in July 2025, short-term hoarding demand would weaken, but the timeline would lengthen. Transactional demand would be amplified at key deadlines, while precautionary demand would be smoother but more sustainable, supporting a steady rise in copper prices. 3) If a less expected plan is adopted: immediate tariffs would reduce future hoarding, but existing stockpiles are unlikely to return. A full cancellation would carry some risk of stockpiles returning, mainly from COMEX.
Copper Sector Valuation Recovery May Be in Early Stages; Recommend Sector Allocation
Although domestic copper sector PE valuations have moderately recovered from the 9-10x emotional low, as of July 22, 2026, we estimate the sector's 2026 PEs (based on copper prices of $13,000 and $14,000/tonne) at just 10.9x and 10.2x, respectively—still historically low. Our review shows that copper sector PE levels have a strong positive correlation with copper price hike expectations over the next 1-2 quarters. Reaching valuation lows (10x or lower) requires the dual combination of "lack of price hike expectations" and "pessimistic market sentiment." We believe both factors are now undergoing positive marginal shifts, leaving ample room for further valuation recovery. Improving price expectations (i.e., upward earnings revisions) will further amplify stock price upside.
Risk Factors:
Risk of a significant copper price decline; US copper tariff timing, method, or magnitude falling short of expectations; weaker-than-expected downstream demand; sustained rises in sulfuric acid, diesel, and other costs leading to supply shortfalls or higher costs; liquidity shocks from escalating US-Iran conflict; supply risks from extreme weather; operational risks for Chinese companies' overseas copper mines.
Investment Strategy:
Multiple positive factors are pushing copper prices back toward $14,000 per tonne. Key drivers like falling inventories and supply disruptions will persist, and most potential tariff paths remain favorable for copper. Under a neutral assumption, copper prices could challenge $15,000 per tonne this year. We recommend focusing on investment opportunities in the copper sector benefiting from the combined effect of valuation and earnings elasticity.