LME Week (19-23 October) in a rain soaked London precipitated a somewhat less exuberant assessment of the copper market than recent years. The main industry discussion points were generally familiar, such as prospective US tariffs on refined copper imports and mine project development timelines. Though, for copper concentrates, discussions were against a backdrop of ongoing dramatic changes in pricing and sales structure.
London more cautious on the copper outlook
Market sentiment during LME Week was more cautious this year. That in part reflected a more strained macroeconomic backdrop with respect to geopolitics and AI in particular. The lack of certainty over US refined tariffs was also a factor contributing to relatively limited expectations for further significant price appreciation. However, while some participants dared to utter the b-e-a-r word, the lack of committed market shorts highlighted an apparent continuing medium-to-long-term belief in the structural deficit story for copper, even for those prepared to challenge some of the assumptions.
Shining a light on Argentinian projects
Mine supply discussions highlighted execution risks and limited relief for the custom concentrate market. Feedback supports a potential 2027 H2 restart at Cobre Panama, consistent with our Q3 assumption but contingent on government support and approval.
Negative TCs and strong acid revenues have encouraged miners to consider focusing on lower-grade, higher-sulphur concentrates. Smaller producers may have the operational flexibility to do this, but larger miners highlighted concentrator and logistics constraints including filtration, pipelines and storage. The opportunity remains asset-specific and dependent on smelter blending capacity.
The message was repeated that high prices alone are not accelerating projects, with permitting, infrastructure and community constraints continuing to delay development, along with rising capex concerns. Argentina, which has a raft of prospective greenfield projects due to start-up over the medium-term, was a particular discussion point. Market participants highlighted the need for government support for infrastructure, water availability and clarity on export logistics as risks to project timelines, despite an improved investment framework.
Benchmark still likely but heading for negative triple digits
The consensus strengthened through the week that a 2027 annual benchmark would eventually be agreed, with expectations ranging from -$80 to -$120 and greater confidence in a triple-digit negative outcome. Pricing structures remain mixed, with some producers committed to benchmark terms and others more exposed to index/spot pricing. Smelters challenged both the pace of that shift and indexes’ representativeness of the market.
Smelter economics increasingly depend on non-TC/RC revenues, particularly sulphuric acid and metal recoveries, making the decline in acid prices a major talking point in London.
China and data centres remain the main demand discussion points
There were more challenges to the underlying demand outlook for copper than a year ago. Geographically, China, which accounts for 60% of refined metal consumption, was the primary focus. The country’s export-related copper demand has risen by almost 10% this year. However, domestically-related cathode use has fallen by nearly 5%, dragged down by declines in construction completions and solar installations, leaving total copper demand unchanged y/y. Set against this bifurcated demand pattern, can Chinese red metal use really grow by 4% (800,000 t) in 2027?
End-use-related discussions were mainly centred on the so-called growth markets and in particular AI / data centres. The debate was less about data centre-related copper demand in 2026, estimated by CRU to be 1 Mt, but more that over the next five years. Forecasts of the data centre build-out vary considerably, which is to be expected for a frontier technology. Perhaps more surprising is the continued lack of agreement on the associated copper intensity, with CRU’s 35 t/MW towards the higher end of the range.
Copper scrap in China lost or missed?
While the possibility of EU and US export restrictions was considered, the main scrap-related discussion point last week was the 400,000-800,000 of secondary units that have been held back from the domestic market in China by the introduction of so-called reverse invoicing. However, interpretations of these quoted numbers varied between those who saw the secondary units as truly ‘lost’ and those who viewed them simply as not having ‘happened’; ceteris paribus the former having a more significant positive effect on cathode demand than the latter.
Substitution concerns persist
The Cu-to-Al price ratio is already over four and is expected to head towards six over the medium-term, according to CRU forecasts. Consequently, substitution, and thrifting, concerns were repeated during LME Week. However, consensus was that the process is one of continuing attrition, rather than the wholesale switching of complete sectors away from copper and that the easy reductions in red metal use had already been done over the last 25 years.
US tariff outcome uncertain but pivotal for the refined market
The general view expressed, and one we agree with, was that there will be no US tariff on refined copper imports but also no formal announcement. While by no means unanimous, the balance of opinion was that overseas shipments to the US will remain higher than actual requirements (~90,000 t/m) in 2027. How much higher, though, remains to be seen: the US stockpile is already nearly one year’s worth of consumption, but in a global market with an expected surplus of less than 200,000 t next year, any country-specific inventory building is likely to trigger a repeat of 2026’s regional supply concerns.
European cathode premium hike highlights competitive threat
Aurubis indicated its 2027 European cathode premium of $347 /t just prior to LME Week. Conversations centred less on the 10% y/y increase and more on the widening gulf between benchmark-based cathode and rod transformation premiums in Europe and those for spot-based equivalents in China. The difference in 2027 is forecast to be over $400 /t; hardly good news for Europe’s struggling manufacturing sector. There was less clarity on next year’s long-term cathode elsewhere. In the US, exchange registered metal is still likely to command a premium to COMEX, especially domestic material, but EQ cathode is in many cases expected to be sold at a discount to the exchange price.
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