The copper market faces short-term pressure, while long-term electrification demand remains reinforced

Overview

This report is JPMorgan's Metals Weekly, centered on discussions around the copper market during CESCO week. It focuses on how sulphur, sulphuric acid, diesel, US tariffs, Chinese demand, and electrification trends affect copper prices and copper supply-demand dynamics. The authors believe current supply-side constraints are more about cost inflation than immediate large-scale production cuts, making copper prices more likely to first reflect demand damage in the short term; however, energy security and the push away from oil will strengthen medium- to long-term electrification investment, thereby improving the structural demand outlook for copper.

Core views

First, disruptions to DRC sulphur imports caused by turbulence in the Strait of Hormuz could theoretically threaten upwards of 1.8mmt of DRC SX/EW copper output, equivalent to about 7% of global refined copper supply, but inventories and shipping lags mean any real impact may still take months to emerge. Second, Chile's exposure to tightening sulphuric acid markets appears relatively manageable in 2026 and is more likely to be concentrated in inefficient, high-acid-consumption projects, with an estimated impact of about 50-60kmt on copper cathode output this year; however, if the acid market remains tight, risks are greater in 2027. Third, diesel constraints may affect logistics in the African Copperbelt and power supply for remote small-scale projects more quickly, and may also force miners to cut back auxiliary activities such as stripping and exploration, creating ore-grade or output catch-up pressure in 2027. Fourth, the risk of US refined copper tariffs is rising; if phased tariffs are implemented, they could lock inventories into the United States and continue to affect COMEX/LME arbitrage and global available supply. Fifth, China's demand has improved in the short term but willingness to chase higher prices is limited, while demand expectations in Asia and Europe have already been revised down; in the long term, demand is supported by EVs, energy storage, power grids, and low-carbon investment.

Analysis framework

The report is mainly based on meetings and discussions during CESCO week with physical-market participants, mining companies, and industry players, combined with regional supply-chain constraints, inventory cover, shipping lags, acid consumption intensity, import arbitrage, policy scenarios, and JPMorgan's metals price forecasts to form its view on copper supply-demand dynamics and price risks.

Methodology notes

• commodities_supply_demandCopper supply-demand balance and cost curve analysis

  The sequencing of supply disruptions versus demand destruction

  The report distinguishes between cost inflation and physical supply disruptions, arguing that copper is not currently being driven mainly by the cost curve, so demand shocks may be reflected in prices faster than supply shortages.

• scenario_analysisTail-risk scenario analysis

  Tail risks from energy prices, logistics disruptions, and macro demand

  The report treats disruption in the Strait of Hormuz, OECD crude inventories nearing operational lows, and nonlinear upside in oil-product prices as macro scenarios that could pressure copper prices lower.

• policy_analysisSection 232 tariff probability tree

  US refined copper import tariff pathways

  The report compares paths including no tariff increase, continued ambiguity, a small initial tariff followed by escalation, and a sudden large tariff increase, and leans toward the view that the US is more likely to implement phased tariffs before January 2027.

• market_intelligenceCESCO conference channel checks

  Validation through industry participant discussions

  The report uses market feedback during CESCO week to validate areas of consensus and disagreement on issues such as sulphur, sulphuric acid, diesel, tariffs, and Chinese spot demand.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Copper

  Core subject of the research

  Strengths

  Supported over the long term by electrification, EVs, energy storage, power grids, and energy security investment; supply additions and project FIDs remain challenging.

  Weaknesses

  Short-term demand may be dragged down by energy prices, supply-chain disruptions, weaker business confidence, and government fiscal pressure.

  Comparison

  Compared with aluminum, copper had previously faced substitution pressure, but that pressure may ease as aluminum supply vulnerabilities are exposed.

  Risks

  Macro tail risks, US tariffs, sulphur and diesel shortages in the DRC, tight sulphuric acid markets in Chile, and slow restart progress at Cobre Panama.

• Refined Copper

  Transmission channel for tariff and inventory policy

  Strengths

  US import and inventory accumulation show significant policy front-running, and if tariffs are implemented they may lock inventories into the US.

  Weaknesses

  Policy uncertainty is high, and COMEX/LME arbitrage could shift sharply.

  Comparison

  The refined copper tariff debate is being referenced alongside Section 232 policies on steel, aluminum, and copper products.

  Risks

  Phased tariffs could disrupt global available supply and continue attracting or locking in cargoes flowing to the US.

• Gold

  By-product economics variable for copper mining projects

  Strengths

  Higher and more persistent gold price assumptions could improve the economics of gold-bearing copper projects and reduce the required copper incentive price.

  Weaknesses

  Mining companies may adjust project assumptions only after gaining confidence in higher long-term gold prices.

  Comparison

  Gold influences copper projects more through by-product credits than by directly determining spot copper supply and demand.

  Risks

  If long-term gold price assumptions decline, the improvement in project economics will be limited.

• Diesel

  Cost and operational constraint in the copper supply chain

  Strengths

  Large mining companies currently view diesel mainly as a cost pressure, and it has not yet broadly translated into major production disruptions.

  Weaknesses

  African Copperbelt logistics, small SX/EW projects, and remote power supply are highly dependent on diesel.

  Comparison

  Diesel shortages may affect parts of DRC copper supply faster than sulphur shortages.

  Risks

  If miners cut stripping and exploration to save diesel, it may create ore-grade or production catch-up pressure in 2027.

• Aluminum

  Copper substitute and comparable base metal

  Strengths

  Exposed vulnerabilities in aluminum supply may reduce substitution pressure on copper.

  Weaknesses

  It is also affected by energy and supply-chain disruptions.

  Comparison

  The report believes that exposed aluminum supply risks may benefit copper in the substitution competition.

  Risks

  If aluminum prices or supply recover, substitution pressure on copper may re-emerge.

Key data

• Potentially affected SX/EW copper output in the DRCupwards of 1.8mmtEquivalent to about 7% of global refined copper supply, but would be more likely to materialize only if traffic through the Strait of Hormuz were severely disrupted for an extended period.
• DRC sulphur inventory cover2-4 monthsInventory buffers and an approximately 2-month shipping chain push major short-term production-cut risks further out.
• China's sulphuric acid exports in 20254.6 mmtChina is the largest sulphuric acid exporter, and a planned export ban starting in May is tightening the global acid market.
• Chile's open acid import exposurearound 1 mmt, about 15% of total requirementsInefficient, high-acid-consumption projects are more vulnerable to cost and availability pressure.
• Potential impact on Chile's 2026 copper cathode output~50-60 kmtThe report believes the actual impact this year may be relatively limited, but risks are greater in 2027.
• US refined copper imports in 1Q26~500 kmtStill more than double the historical first-quarter average, reflecting inflows from previously booked shipments.
• US refined copper inventory buildup over the past 15 monthsmore than 1 mmtJPMorgan believes tariff policy may be intended to keep this inventory within the United States as a strategic reserve.
• Potential phased tariff path15%, then 30% one year laterThe report believes this path is consistent with the design of the prior executive order, allowing inventories to be locked in while maintaining incentives for front-loaded imports.
• Potential copper price support range$9,000-$10,000/mtIf macro tail risks trigger a sharp selloff in copper prices, long-term buyers may provide support in this range.
• JPMorgan copper price forecast2026: 12,956; 2027: 11,625The table shows annual average price forecasts; quarterly forecasts include 2Q26 13,500, 3Q26 13,000, and 4Q26 12,500.
• JPMorgan gold price forecast2026: 5,651; 2027: 6,550Higher by-product gold price assumptions could reduce the incentive copper price required for some copper projects.

Impact & implications

For investment judgment, the report conveys a maturity mismatch: in the short term, copper prices may come under pressure first from slowing demand, energy-price shocks, and falling risk appetite; although supply-side risks exist in the DRC, Chile, diesel, and tariffs, most of these shocks require more time to materially affect production or available inventories. Over the medium to long term, renewed acceleration in investment tied to energy security, EVs, energy storage, power grids, and decarbonization will reinforce copper's structural demand.

Risks

• A rise in energy and oil-product prices could rapidly worsen macro demand and risk appetite.
• Prolonged disruption to traffic through the Strait of Hormuz could amplify risks to DRC sulphur imports and diesel supply.
• Restrictions on China's sulphuric acid exports could further tighten the global sulphuric acid market and affect SX/EW projects in Chile and elsewhere.
• The US could impose Section 232 tariffs on refined copper imports, disrupting COMEX/LME arbitrage, inventory flows, and global available supply.
• Shortages of key inputs such as PVC and resins in parts of Asia, Europe, and Latin America could weigh on cable and spot copper demand.
• China's restocking could weaken after copper prices return to high levels, leaving spot demand persistence below expectations.
• Miners cutting auxiliary operations to save diesel may defer ore-grade and production risks into 2027.
• The restart of Cobre Panama may be slow, leaving uncertainty around the pace of recovery in global mine supply.

What to watch

• Whether energy and sulphur logistics through the Strait of Hormuz recover in the second quarter.
• DRC sulphur inventory cover, alternative sources, and operating conditions at small SX/EW projects.
• Whether China's sulphuric acid export ban sees selective quotas or policy adjustments.
• Acid market prices in Chile, open import volumes, and production conditions at inefficient high-acid-consumption projects.
• Progress in the US Section 232 copper tariff review around June 30 and the specific tariff path.
• COMEX/LME arbitrage curves, US refined copper import volumes, and whether US inventories remain in the country or leave.
• The pace of Chinese cathode copper inventory drawdowns, import arbitrage, and willingness to buy at high prices.
• OECD crude inventories, oil-product prices, and the response of global risk assets to the energy shock.
• Whether demand data for EVs, energy storage, power grids, and European/US electric vehicles continue to improve.
• The restart timetable for Cobre Panama, changes in guidance for Kamoa-Kakula and Grasberg, and labor negotiations in Chile.