Wutong Securities: Tightening at the mine end drives copper prices to new highs; AI has growth potential as a structural demand increment.

Minmetals Securities has released a research report stating that copper prices will continue to rise and reach a historical record in 2026, with ongoing tightening on the supply side being the core factor driving the current increase in copper prices. On the policy front, expectations of U.S. tariffs have created arbitrage opportunities, with a siphoning effect pushing up copper prices. In the medium to long term, the AI sector indeed has the potential to grow into a structural demand increment for copper, but in the short term, the actual consumption of copper in the AI field constitutes less than 3%. The key points from Minmetals Securities are as follows: Current copper prices are operating within a historically high range. Copper prices will continue to climb in 2026, setting new historical records. The three-month copper futures on the London Metal Exchange (LME) hit a historical peak of $14,527/ton during trading on January 29. Looking back over the year, copper prices have shown renewed strength recently. In the international market, LME copper futures surpassed the $14,000 mark, with the settlement price for three-month copper on August 6 being $14,260/ton, marking an increase of nearly 14% year-to-date, approaching the historical peak reached in January. On the domestic market, the SHFE copper main contract reached a high of 108,450 yuan/ton on August 12, close to the years peak in May. Ongoing tightening on the supply side is the core factor driving the current rise in copper prices. In terms of existing capacity, disruptions in production and declining grades have resulted in major copper companies producing below expectations, supporting high copper prices. The International Copper Study Group (ICSG) has revised its forecast for global copper mine production growth in 2026 from 2.3% to 1.6%, corresponding to a production volume of approximately 23.56 million tons. On the incremental front, the resumption of production and the commissioning of new mines have been delayed due to geopolitical issues and regulatory approvals. It is noteworthy that external disruptions such as extreme weather, geological risks, and policy bans are increasingly impacting supply. As a market bellwether, the copper concentrate processing fee fell to -$174/ton in August, marking the lowest level since 2021. On the policy front, U.S. tariff expectations have created arbitrage opportunities, with a siphoning effect pushing up copper prices. After the U.S. initiated a 232 investigation into copper products in February 2025, the market began to anticipate tariffs on refined copper. This expectation directly pushed up COMEX copper prices, causing them to remain consistently higher than LME copper prices. Consequently, the price differential drove global copper resources into the U.S. Driven by stable arbitrage profits, global traders concentrated on shipping refined copper to the U.S. As of early August, COMEX copper inventory had surged to over 650,000 tons, up approximately 665% from the 80,000-90,000 tons at the time the investigation was initiated in February 2025, marking a record high in the exchanges century-long history. On the demand side, the impact of AI on copper prices is more reflected in the value reassessment and expected premium arising from the strategic positioning of the new oil of the AI era, rather than actual consumption pull, which is still in its early stages. The physical properties, cost-effectiveness, and existing technological ecosystem of copper collectively determine its structural advantages in AI applications. In the medium to long term, the AI sector indeed has the potential to grow as a structural demand increment, with an estimated compound growth rate of copper consumption in global computing power from 2025 to 2030 at 21%. However, in the short term, the actual usage of copper in the AI sector is relatively small, accounting for less than 3%, and its actual consumption scale is currently insufficient to significantly impact the supply-demand balance in the copper market, with its current weight of influence far lower than that of supply and policy. Industrial metals Improving macro sentiment is boosting the sector, and in July, metal prices showed a strong trend with fluctuations, particularly focusing on copper, tin, and nickel. Copper: Ongoing tightness at the mine level continues to deepen, with processing fees hitting historical lows, domestic inventories dropping to low levels, and copper prices showing a stronger trend; Tin: Supply disturbances from Myanmar, Indonesia, and the Democratic Republic of the Congo persist, with low inventories supporting prices at high levels, but seasonal demand limits the extent of price increases; Nickel: A divergence in refined nickel inventories is observed, with tightening policies in Indonesia and rising costs providing bottom support, but soft downstream consumption constraining upward potential, leading to wide fluctuations in nickel prices. Other metals Rigid supply dominates, and the price center for strategic minor metals is expected to rise, with a focus on tungsten and molybdenum. Tungsten: The willingness to maintain prices at the mine level is stable, but downstream consumption is sluggish, leading to delays in inventory replenishment; prices along the industry chain have seen a decline followed by stabilization, with a standoff at the end of the month. Demand from the hard alloy and high-end manufacturing sectors, along with high overseas premiums, is accumulating momentum for subsequent price increases; Molybdenum: Mining companies are near capacity limits, and weak imports, coupled with steady demand from the special steel and new energy sectors, resonate to support a continuously strong price performance in a tight supply-demand balance. Risk warnings: 1. Risks of changes in U.S. copper tariff policies; 2. Risks of exceeding expected supply release from the mining sector; 3. Risks of fluctuations in the intensity of geopolitical conflicts; 4. Construction of AI data centers falling short of expectations.