Jefferies is bullish on copper prices: scarcity value and emerging demand may drive this cycle above US$8/lb

Overview

This is a global metals and mining research report from Jefferies focused on the outlook for copper prices. The central view is that copper's large premium to marginal cost is not simply a result of cyclical demand, but instead reflects deeper structural supply constraints, demand for supply security, and scarcity value. Jefferies believes copper is one of the most attractive commodities over the next 3-5 years, and that LME copper prices in this cycle could rise well above US$8/lb, with the market potentially coming to view US$8/lb as a more normalized price level over time.

Core views

The report's core views are as follows: First, the relationship between copper prices and marginal cost has changed structurally; prices are no longer mainly mean-reverting around the cost curve and instead embed a higher scarcity premium. Second, since 2000, China has become the dominant end market, while new demand sources such as AI, defense, energy infrastructure, EVs, and renewable energy have reinforced long-term demand growth. Third, the supply side lacks new low-cost resource unlocking technologies, and ESG, inflation, capital expenditure, and project development cycles have led to a pronounced lack of response in new supply to higher prices. Fourth, the current copper price of about US$6.09/lb is already well above C1 and C2 marginal costs, but the report still believes prices need to remain elevated to incentivize greenfield projects, with the estimated greenfield incentive price above US$6/lb. Fifth, a rising copper price environment is expected to lift mining valuations broadly, with Freeport, First Quantum, Anglo, and Teck named as preferred copper-related names.

Analysis framework

The report compares copper prices with the 90th percentile C1 cash cost on the Wood Mackenzie cost curve, C2 cost, and sustaining capital expenditure to assess how far copper prices have moved away from historical marginal-cost anchors. It also compares different periods, including 1980-2026, 2000-2026, and 2020-2026. The report further combines a global copper supply-demand model, long-term real copper price trends, and valuation sensitivity analysis for mining companies to derive the fundamental logic behind copper remaining elevated.

Methodology notes

• Commodity cost curve analysisCopper price premium relative to the 90th percentile cost curve

  Measure whether copper prices are still anchored to marginal cost by looking at the premium over C1 cash cost, C2 cost, and sustaining capex.

  The report argues that historically, copper prices above marginal cost mainly served to incentivize supply, and the premium tended to mean-revert; but the current premium has widened materially, indicating that prices are more about scarcity value and supply security than just cyclical demand swings.

• Supply-demand fundamentals analysisGlobal copper supply-demand model

  Assess the medium-term balance of the copper market by combining demand growth and supply constraints.

  The report points out that even under conservative demand and price assumptions, the global copper market remains supported by demand growth and supply bottlenecks, and copper prices may stay elevated over the next 3-5 years.

• Valuation sensitivity analysisMining company fair value sensitivity under different normalized copper price assumptions

  Assess changes in miner valuations under different normalized copper price assumptions.

  The report notes that once the market begins to use earnings under a US$8/lb copper scenario as the normalization base, copper miners could trade at valuation multiples consistent with that normalized price.

Asset mapping & comparison

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

• Copper

  The core research subject; the report is bullish on its 3-5-year outlook.

  Strengths

  Supported by structural demand growth, expansion of new end markets, a supply-security premium, and supply constraints.

  Weaknesses

  Prices are already well above the historical cost anchor, so there may be cyclical volatility and downside risk from a pullback at elevated levels.

  Comparison

  Compared with the historical mean-reversion framework, the report views current copper pricing more as scarcity-asset pricing.

  Risks

  If demand slows, supply responds more than expected, or cost-curve assumptions change, the premium could compress.

• Freeport-McMoRan (FCX)

  One of the copper-related top picks mentioned in the report.

  Strengths

  Has direct leverage to higher copper prices in an upcycle.

  Weaknesses

  The report summary does not discuss company-specific weaknesses.

  Comparison

  Like other copper miners, it may benefit from a higher normalized copper price assumption.

  Risks

  Company-level operating, cost, capital expenditure, and jurisdictional risks still need separate assessment.

• First Quantum (FM CN)

  One of the copper-related top picks mentioned in the report, and the disclosure notes that Jefferies had an investment-banking relationship with it over the past 12 months.

  Strengths

  Potential earnings and valuation leverage in a rising copper price cycle.

  Weaknesses

  The research disclosure includes a potential conflict-of-interest note, so investors should apply independent judgment.

  Comparison

  Ranked alongside Freeport, Anglo, and Teck as a preferred copper-related name.

  Risks

  Company-specific operating risk, financing risk, regulatory risk, and disclosed investment-banking conflicts of interest warrant attention.

• Anglo American (AAL LN)

  One of the copper-related top picks mentioned in the report.

  Strengths

  A rising copper price environment could improve the profitability and market valuation of its related assets.

  Weaknesses

  The report summary does not discuss company-specific weaknesses.

  Comparison

  Listed together with Freeport, First Quantum, and Teck as a preferred copper-related name.

  Risks

  The diversified mining portfolio, asset disposals, project execution, and commodity price volatility could affect the extent of the benefit.

• Teck Resources Limited (TECK/B CN)

  One of the copper-related top picks mentioned in the report.

  Strengths

  Has resource exposure and valuation sensitivity in a rising copper price cycle.

  Weaknesses

  The report summary does not discuss company-specific weaknesses.

  Comparison

  Like other copper miners, it may be re-rated under a higher normalized copper price scenario.

  Risks

  Project execution, cost inflation, capital expenditure, and a pullback in copper prices are the main uncertainties.

• Antofagasta (ANTO LN)

  One of the other companies mentioned in the report, with a disclosed HOLD rating.

  Strengths

  Has copper-related business exposure and may benefit from an industry price upswing.

  Weaknesses

  The report notes a HOLD rating, indicating a weaker relative preference than BUY names.

  Comparison

  Unlike the preferred names Freeport, First Quantum, Anglo, and Teck, the report does not list it among the top picks.

  Risks

  Valuation, company-specific operating factors, and copper price volatility may limit returns.

• Lundin Mining Corp (LUN CN)

  One of the other companies mentioned in the report, with a disclosed BUY rating.

  Strengths

  May benefit from a higher copper price environment.

  Weaknesses

  The summary does not explain why it was not included among the top picks.

  Comparison

  Also a copper-related BUY name, but the report's preferred list explicitly does not include Lundin Mining.

  Risks

  Company project execution, costs, and copper price sensitivity still require further assessment.

Key data

• Current copper priceUS$6.09/lbThe report says this price is materially above marginal cost and sustaining capex levels.
• Average premium to C1 cost, 1980-202641%Benchmarked against the 90th percentile of the Wood Mac C1 cash cost curve.
• Average premium to C2 cost, 1980-202618%C2 cost includes cash costs plus depreciation and amortization and is used by the report as a marginal-cost proxy.
• Average premium to C1 cost, 2000-202657%The report believes this period was shaped by Chinese demand, new end markets, supply constraints, and inflation.
• Average premium to C2 cost, 2000-202627%This shows the copper market operating under tighter supply conditions and greater cost pressure.
• Average premium to C1 cost, 2020-202670%Recent premiums have risen further versus the long-term historical level.
• Average premium to C2 cost, 2020-202631%The report treats this as one piece of evidence for a structurally tight balance.
• Current premium to C1 marginal costabout 150%The report says current copper prices are far above C1 marginal cost.
• Current premium to C2 marginal costabout 99%The report says current copper prices are also far above C2 marginal cost.
• 90th percentile C1 cost plus sustaining capexabout US$3.03/lbThe report suggests that the true marginal cost, if sustaining capex is fully included, may be far above US$4/lb.
• Estimated greenfield incentive price>US$6/lbThe report uses this level to show that sustained high copper prices are needed to stimulate new supply.
• Potential copper price peak in this cycle>US$8/lbThe report believes LME copper prices could rise well above US$8/lb over the next 3-5 years.

Impact & implications

If Jefferies' view is correct, high copper prices would no longer be just a short-cycle supply-demand mismatch, but a repricing of long-term supply scarcity, security of supply, and inadequate capital spending. This means mining company earnings and valuations may need to be reassessed under higher normalized copper price assumptions, and pure-play copper miners as well as diversified miners with high copper exposure could benefit. At the same time, end-user industries that consume copper could face higher and more persistent raw material cost pressure.

Risks

• Copper prices are already far above the cost curve, so if demand falls short of expectations or the macro cycle weakens, the premium could narrow.
• The report's view of prices above US$8/lb has not yet been fully modeled as its base case, so forecast uncertainty remains.
• If high prices spur supply-side expansion, restarts, or technology breakthroughs more than expected, the scarcity-value thesis could weaken.
• ESG, permitting, inflation, and capital expenditure constraints support the high-price thesis, but they may also raise project execution risk for miners.
• Mining stocks are also affected by company-specific factors, including operations, costs, asset quality, political and regulatory risk, financing, and foreign exchange risk.
• Jefferies discloses market-making or investment-banking relationships with some covered companies, so investors should note potential conflicts of interest.

What to watch

• Whether LME copper prices approach or break above US$8/lb over the next 3-5 years.
• Whether copper's premium to the C1 and C2 cost curves and sustaining capex remains elevated.
• The actual growth rate of new end-market demand from AI, defense, EVs, renewable energy, and energy infrastructure.
• Whether miners' capital expenditure begins to recover materially and whether greenfield projects accelerate under high copper prices.
• The marginal impact of China demand and the global manufacturing cycle on copper consumption.
• Earnings and valuation re-rating for copper-related miners such as Freeport, First Quantum, Anglo, and Teck under a high copper price assumption.