Copper Rally Lifts European Miners, But Green Momentum Meets Policy & Supply Hurdles

Copper prices are soaring on persistent supply shortages and robust demand. They hit $5.41 a pound in December 2025, a 29.5% annual surge. Earlier in late 2024, prices hit a London Metal Exchange (LME) record of $11,200 per metric ton according to JPMorgan research. This rally is fueled by major mine shutdowns at Indonesia's Grasberg and Chile's Quebrada Blanca operations, which are already creating acute supply strains. Fears of U.S. tariffs on refined copper further restrict global arbitrage. Supply growth remains sluggish, projected to rise just 1.4% in 2026, worsening the imbalance.

The outlook points to continued pressure. Analysts at J.P. Morgan predict prices could peak at $12,500 per metric ton in the second quarter of 2026. While demand from data centers and green energy projects is strong, uncertainties linger. China's economic health, a massive consumer, creates demand ambiguity. Furthermore, substitution from aluminum, while possible long-term, is unlikely to ease these tight near-term conditions. The combination of constrained supply growth and resilient demand leaves the market fundamentally tight.

Copper Stocks Ride Price Surge Amid Production Headwinds

Copper prices hit a record $11,183 per ton in October 2025, powered by surging demand for electrification, renewables, and defense applications, while supply constraints persist due to mining disruptions and underinvestment.

This price rally translated directly into strong investor returns, with the STOXX Global Copper Miners index jumping 55% in 2025, significantly outperforming broader market benchmarks. Expectations of a growing supply deficit, projected at 24% demand growth by 2035, have fueled buying enthusiasm for copper miners, despite near-term operational hurdles.

This surge in stock prices has not been matched by near-term production growth for major players. Rio Tinto's Q3 copper output fell 1% year-on-year to 168,000 tonnes, a decline directly linked to a 44% production cut at its key Kennecott operation. Kennecott's struggles stem from highwall instability forcing reliance on less efficient lower-grade stockpiles, a problem that analysts warn will continue to constrain output through 2026. While Oyu Tolgoi boosted production by 19% YoY, weather and maintenance disruptions caused a 5% quarterly dip there, highlighting the sector's operational frictions. The stock market, however, seems more focused on the long-term copper shortage narrative than these current production dips.

Glencore showed sequential improvement in Q3, with copper production rising 9% quarter-on-quarter to 242,600 tonnes, driven by recoveries at Antapaccay and Collahuasi and better performance in the DRC. Yet, translating this quarterly gain into annual success proved difficult; full-year copper production remains 4% below 2023 levels. The company maintained its full-year guidance, but the persistent shortfall underscores the challenges miners face in scaling output quickly to meet surging demand. While investors cheered the sequential uptick, the annual figure reveals the gap between short-term market optimism and physical production realities, tempered by ongoing mine plan revisions and operational adjustments across the sector.

Growth thesis: Green demand drivers and penetration

The green energy transition is accelerating copper demand through multiple powerful forces. Data centers alone consume 27-33 tonnes of copper per megawatt of capacity, driven by explosive AI infrastructure expansion. This demand surge compounds with broader electrification needs in renewables and defense, creating a perfect storm for the metal. Analysts project copper consumption will grow 24% by 2035, overwhelming existing supply chains that face mounting pressure from legacy mine declines.

Current market dynamics reveal severe tightening. Copper prices hit a record $11,183 per ton in October 2025, while the STOXX Global Copper Miners index surged 55% this year as investors price in persistent shortages. The deficit picture worsens: projects face a projected 304,000-tonne refined shortfall in 2025 that will likely expand in 2026. High prices alone can't resolve these constraints since new production remains limited despite copper's new designation as a critical material by U.S. and EU policymakers.

Scaling copper supply faces formidable operational headwinds. New mines confront escalating delays from environmental reviews, regulatory hurdles, and local opposition, while smelting capacity stretches thin under recycling pressure. European mining stocks rose on high-price expectations but remain vulnerable as carbon tax policies add compliance costs. Even with prices above $11,000/tonne, the industry's underinvestment cycle and permitting bottlenecks suggest supply growth will stay chronically behind demand for years, creating sustained upward price pressure.

Risiness & Guardrails: Policy Costs and Supply Constraints

The copper bull case faces mounting policy and operational headwinds. EU carbon reforms are already squeezing costs: the 2023 "Fit for 55" overhaul phases out free emissions allowances for energy-intensive industries like mining, forcing companies to pay for compliance. This pressure intensifies since maritime transport emissions were added to the EU Emissions Trading System in 2024, with operators now paying an average of EUR 64.74 per ton. For miners already operating on thin margins, these mandatory purchases could erode profitability as they scramble to meet stricter 2030 emissions targets.

Rio Tinto's operational struggles highlight physical supply risks. Kennecott's copper output plunged 44% in Q3 2024 due to highwall instability, forcing reliance on lower-grade stockpiles that will likely depress production through 2026. While Oyu Tolgoi offset some losses with a 19% annual increase, weather disruptions and maintenance caused a 5% quarterly dip. These execution challenges underscore how real-world constraints could undermine supply growth even as demand surges for energy transition metals. The market's optimism now faces a reality check: policy-driven costs and project delays may outpace the industry's ability to scale production efficiently.