Goldman Sachs Boosts Copper Price Forecast to $9,890 as Global Supply Shortages Drive $10,000 New Normal

Copper's New Normal: Market Discovers $10,000 "Structural Pivot" Amid Global Supply Squeeze

Physical Deficits and Fragmented Trade Reshape Copper's Long-Term Trajectory

The gleaming metal that powers the world's electrification revolution is sending a clear message to markets: the era of cheap copper is over.

As warehouse stocks plummet to critical levels and backwardations reach multi-year highs, copper has established a new "structural pivot" around $10,000 per ton – a price point that major banks and trading houses now view not as a ceiling, but as the new baseline necessary to incentivize future production in an increasingly constrained market.

Goldman Sachs became the latest institution to revise its outlook upward this week, raising its forecast for London Metal Exchange copper prices in the second half of 2025 to an average of $9,890 per ton (currently at $9,712 as of 25 June 2025), up from its previous estimate of $9,140. The bank expects prices to peak at $10,050 this year before settling at $9,700 by December, with further strengthening to $10,350 by the end of 2026.

The Perfect Storm: Vanishing Inventories and Production Shortfalls

At the heart of copper's remarkable resilience is a supply crunch that shows no signs of abating. LME on-warrant stocks have plunged 65% year-to-date to approximately 96,000 tons – representing less than four days of global consumption – while the cash-to-three-month spread has blown out to a backwardation of $345 per ton, signaling acute physical tightness.

"The market is discovering what the true incentive price for new supply looks like in an era of structurally tighter concentrate, politicized trade flows, and broadening demand," said a senior metals strategist at a European bank who requested anonymity due to the sensitivity of client positioning.

The supply outlook has deteriorated significantly in recent months. The closure of First Quantum's Cobre Panamá mine, which alone accounts for about 1% of global copper supply, has removed approximately 330,000 tons from the market with no restart timeline in sight. Meanwhile, flooding at the Kamoa-Kakula Phase 3 project has forced a 28% reduction in 2025 guidance to 370,000-420,000 tons, cutting another 140,000 tons from expected output.

Social unrest continues to threaten production at Peru's Las Bambas mine, adding another layer of geopolitical risk to an already strained supply chain. These disruptions have effectively neutralized the International Copper Study Group's projected 289,000-ton surplus for 2025, with many analysts now expecting a deficit of at least 120,000 tons.

Demand Broadens Beyond Electric Vehicles

While electric vehicle production remains a significant driver – with the International Energy Agency projecting global sales to exceed 20 million units this year – copper demand has broadened considerably across multiple sectors.

"We're seeing the first major utility capital expenditure up-cycle since 2010," noted an infrastructure specialist at a U.S. asset manager. "The Department of Energy has earmarked $1.5 billion for near-term transmission upgrades, and there's a scramble to connect 150 gigawatts of new capacity. When you consider that transmission cable requires 3-4 tons of copper per megawatt, the numbers become quite substantial."

Data centers supporting artificial intelligence infrastructure are emerging as another significant source of demand, while the reshoring of manufacturing to the United States and India's infrastructure push continue to support traditional industrial consumption.

These factors collectively point to global refined consumption rising from approximately 26.5 million tons in 2024 to 27.4 million tons in 2026 – an incremental million tons of demand that the current supply chain is ill-equipped to satisfy.

Market Distortions: The Tariff Effect

The copper market's structure has been further complicated by the implementation of a 10% global tariff on metal imports into the United States, with a 90-day pause on the threatened 125% escalator specifically targeting Chinese material.

This policy shift has created an unprecedented arbitrage opportunity between the LME and CME, with the spread reaching as high as $1,570 per ton before moderating to $600-700. The result has been a massive flow of metal into CME warehouses, which have swelled to record levels above 152,000 tons.

"This inventory build is illusory," explained a physical trader based in Singapore. "It's tariff-front-run material, not latent supply. The arbitrage will collapse once tariffs either become permanent or are removed – both are binary political events that could trigger significant price volatility."

The LME's recent implementation of temporary position limits to prevent a "nickel-style" squeeze further underscores the fragility of the current market structure, with liquidity increasingly migrating to the CME and physical premiums fragmenting by region.

Investment Landscape: Strategies for a New Paradigm

For investors navigating this complex environment, traditional approaches may prove insufficient. Wood Mackenzie estimates the long-term incentive price for marginal greenfield projects in a 1.5°C scenario at approximately $9,370 per ton in 2022 dollars (roughly $10,200 in current terms) – suggesting that current price levels are barely adequate to ensure future supply growth.

Strategic options for professional investors include:

1. Arbitrage opportunities: Capturing the convergence between LME and CME prices through spread trades as U.S. inventories reach saturation.

2. Options structures: Utilizing call spreads financed by puts to position for a potential Q4 rebound while establishing protection at the structural cost floor around $8,800.

3. Equity exposure: Considering producers with strong growth profiles and operational stability, such as Freeport-McMoRan, Antofagasta, Teck Resources, and Capstone Copper.

4. Relative value plays: Exploiting the copper-aluminum ratio, which currently stands at 4.4 but could extend toward 5.0 as copper-specific deficits contrast with aluminum's post-Russian-sanctions surplus.

The Road Ahead: Higher Highs, Sharper Corrections

As copper establishes itself in this new paradigm, investors should anticipate greater price volatility – with potentially higher peaks during supply shocks but also sharper corrections during demand scares. The distribution of outcomes appears increasingly asymmetric, with upside tail risk to $12,000 per ton remaining live on any fresh mine outage or tariff escalation, while downside risk appears to bottom around $8,700.

"The strip is only just at the level needed to keep new projects coming," observed a commodity fund manager in London. "Any bear-market dip into the mid-$8,000 range should be viewed as cyclical value, not systemic collapse."

For an essential metal caught between insufficient supply, broadening demand, and increasingly fragmented trade flows, the path forward points to a higher average price band – but with a rougher ride along the way.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Past performance does not guarantee future results. Readers should consult financial advisors for personalized guidance.