Economist Sees Copper Bull Case Despite Price Slump

Copper is trading near $6.30 per pound on Tuesday, roughly 8% below its early August peak, following its first weekly decline since June.

Six days ago, economist Steve Hanke advised his followers to remain long on copper, just hours before the rally lost momentum. The supply-driven rationale behind his recommendation, however, remains intact.

Copper Mine Supply Set for First Annual Drop Since 2017

Hanke issued his note on September 9, when London Metal Exchange prices were still hitting record highs.

"The price of copper on London's LME is SOARING. Morgan Stanley now reports that this year could mark the first annual decline in the supply of copper coming from mines since 2017. STAY LONG COPPER," said Steve Hanke, Professor of Applied Economics at Johns Hopkins University.

According to the International Copper Study Group, global mine output slipped 1.1% during the first half of 2026.

Freeport-McMoRan's Grasberg mine continues to operate at about half its normal capacity following a fatal landslide. Chile has once again lowered its national production outlook. Ore grades are also declining, forcing miners to extract more material for less copper.

Three producers account for most of the shortfall. Freeport-McMoRan still runs its Grasberg mine in Indonesia at roughly 50% capacity after the deadly landslide, with full output not anticipated until early 2028.

The company reduced its 2026 copper guidance from 1 billion pounds to 700 million. Chile, meanwhile, cut its national forecast by 2.6% for the second straight quarter.

Geological challenges compound the operational issues. Average ore grades have fallen from about 1.6% in 1990 to below 0.6% at numerous major mines, meaning producers now shift more rock for each unit of metal.

This squeeze pushed copper to a record above $14,600 a ton earlier this month. A comparable supply dynamic also fueled the recent sugar rally.

AI Data Centers Adding to Copper Demand

Meanwhile, artificial intelligence is generating fresh demand.

A single megawatt of data-center capacity can require 60 to 75 tons of metal, much of it copper. Analysts estimate AI facilities alone could add roughly 475,000 tons of demand this year.

That explains the wide range of forecasts. Morgan Stanley projects a 600,000-ton deficit, while JPMorgan sees 330,000 tons. The ICSG places the gap closer to 150,000.

Goldman Sachs remains skeptical, arguing the rally may have overshot and warning that manufacturers could shift toward aluminum if copper stays expensive.

The technical picture is already flashing warning signs.

Copper hit a peak of $6.92 on August 6 and has since formed what appears to be a triple top. It has fallen below $6.53 and is now testing support near $6.29. A further drop could bring $5.90 into focus.

Indicators show copper is still not oversold, with the RSI near 42. If selling persists, the next key support level sits around $5.90.

Washington added further pressure by delaying a tariff decision on refined copper imports, which pushed metal back into LME warehouses.

"Copper has led the decline and now looks to be challenging recent lows, extending the cautious tone," said Neil Welsh, head of metals at Britannia Global Markets.

Hanke's trade has so far moved against him. The key question is whether copper's shortage narrative can withstand the selloff. For now, the charts urge caution, while the mines tell a different story.