CITIC SEC: Supply contraction + tariff expectations, copper prices are expected to reach 16,000 USD within the year.

CITIC SEC released a research report stating that in the first half of the year, the output of major global copper mining companies declined by nearly 5%, and extreme weather conditions and potential disruptions to key auxiliary materials may lead to a continuation of this decline in the second half of the year. Under the trend of improving supply and demand, the foreseeable continued destocking will reinforce the trading elasticity of copper prices; if incremental tariffs are imposed, a new round of intensified inventory accumulation is expected to help copper prices exceed $16,000 per ton within this year. Looking further ahead, the projected medium- to long-term growth rate of copper mine supply is only 2%-2.5%, and the supply peak in 2028-2029 should not be overestimated; however, the contribution of increased output led by Chinese enterprises warrants significant attention in terms of both volume elasticity and value. In the first half of the year, the output of major mining companies continued to decline, and the potential disruptions from extreme weather and key auxiliary materials should not be underestimated. According to CITIC SEC, in the first half of the year, the output of major global copper mining companies decreased by 4.6% year-on-year (with Q1/Q2 being -4.3%/-4.9%), marking four consecutive quarters of decline since Q3 2025. In the first half of the year, leading companies have revised their guidance for 2026-2027 downwards by more than 300,000 tons (the growth rate of output guidance for these companies was revised down from +3.9% to -2.0% from the Q2 2025 financial report to the Q2 2026 report). Although the latest guidance implies that output will recover in the second half of the year, multiple factors suggest that the output may continue to decline in the second half: 1) On a quantitative level, the completion rate of the guidance for companies such as Codelco and Antofagasta in the first half of the year was insufficient at below 45%, with possible risks of further downward revisions; 2) On a qualitative level, the ongoing El Nio phenomenon, which is rarely encountered in many years, may exacerbate extreme weather risks in regions such as Chile, potentially intensifying disruptions to copper mining production. Additionally, if the situation of the U.S.-Iran conflict prolongs, concerns over Zambia's sulfuric acid export policy could disrupt sulfuric acid supply from the Democratic Republic of the Congo and constrain hydrometallurgical copper production. Intensive fundamentals, trading dynamics, and event catalysts are expected to drive copper prices above $16,000 per ton. CITIC SEC estimates that from January to July, the actual supply (production + net imports) and demand for refined copper in China increased by 2.2% and 4.6% year-on-year, respectively, driven primarily by a significant contraction in mine supply and insufficient import levels, while the core driver of demand was stable apparent demand and restocking. SMM predicts that the supply decline trend will continue in August and September, potentially outpacing the weakening demand trend, which could correspond to domestic inventory levels falling below 100,000 tons by the end of September, providing a natural foundation for copper price increases. Considering that the end of September is also a key point for the implementation of the U.S. refined copper tariff scheme, we anticipate the optimal scenario to involve incremental tariffs, while the suboptimal scenario would be that no new tariffs are imposed (i.e., expectations for a delayed implementation remain). In the case of incremental tariffs, the fourth quarter will become a time window for high-intensity inventory accumulation. Referring to the peak U.S. refined copper import volume in July, which drove a 5% rebound in copper prices, we expect that LME copper prices are likely to break through $16,000 per ton within this year. The medium- to long-term supply peak should not be overestimated, and Chinese enterprises will shine in leading production increases. Based on CITIC SEC's analysis and forecast of the production capacity pace of major Chinese incremental mines and foreign enterprises, Chinese mines and foreign mines are expected to contribute approximately 1.5% and 0.8% annualized growth rates to global medium- to long-term supply, respectively. We estimate that from 2026 to 2030, the global copper mine supply growth rates will be -0.6%/+1.9%/+3.2%/+3.0%/+1.4%, with the higher rates for 2028-2029 mainly due to the concentrated commissioning and ramp-up of Chinese mines. However, we believe that: 1) On one hand, even at peak commissioning rates, the supply growth will be similar to our estimated medium- to long-term demand growth rate (around 3%), making it difficult for tight balance to suggest price pressure; 2) On the other hand, Chinese enterprises are expected to fully benefit from the "volume compensates for price" logic.