Scotiabank Flags Copper Price Squeeze Toward $7/lb Amid Supply Deficit

Scotiabank Lifts Copper Price Forecasts, Cites Tight Supply-Demand Dynamics

Scotiabank has revised its copper price outlook upward, projecting a near-term squeeze toward $7/lb amid what it describes as a "material multi-year net deficit position" in the market. The bank's metals team, led by Orest Wowkodaw, highlighted in a 50-plus-page review that supply constraints, particularly from Chile, and extended lead times for new mining projects are unlikely to meet growing demand.

The updated forecasts for 2026-2029 now average $5.95-$6.00/lb, up 10% annually, with a 2030 target of $6.50/lb. The long-run incentive price has been raised to $5.00/lb from $4.50/lb. Spot copper trades around $6.12/lb.

Supply Constraints and Demand Drivers

Chile, the world's largest copper producer, saw output decline 7.9% year-over-year through April, with production falling from 5.83 million tonnes in 2018 to 5.42 million tonnes in 2025. Planned capital expenditure for growth projects is projected to drop to $7.4B/year in 2026-2028, down 49% from $14.7B/year in 2023-2025. Scotiabank warns that even upcoming projects like Copper World and Santa Cruz may face delays.

Demand growth remains robust, with global copper consumption rising 3.7% in 2025 and China posting a 4.6% increase despite economic headwinds. The bank projects annual demand growth of 2.3%-2.5% through 2028, driven by data centers (3.2-3.9% of global supply), defense spending (5-8% of consumption), and grid expansion in emerging markets.

Tariff Risks and Market Implications

The US Section 232 probe on refined copper imports, due by month-end, poses a wildcard. Comex copper trades at a 2% premium to LME, down from 31% in July 2023, as half of global visible stocks have moved to US warehouses. A tariff decision could trigger inventory shifts, tightening global supply further.

Scotiabank recommends copper miners First Quantum (FM), Capstone Mining (CS), Ero Copper (ERO), Freeport-McMoRan (FCX), and Lundin Mining (LUN), citing attractive valuations. The COPX copper miner ETF rose 4.8% on the day.

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