Copper prices have moved into a consolidation phase after a strong rally, with momentum easing around $13,000 per metric ton as elevated prices dampened Chinese demand and rising inventories added short-term pressure.

According to UBS strategists, the recent move higher was driven largely by “ongoing concerns over possible U.S. tariffs on copper and continued disruptions in mine supply, both of which support higher prices.”

Tariff-related risks are likely to persist through the year, reflected in growing COMEX inventories in the U.S. and consistently low stocks outside the country, strategists Dominic Schnider and Wayne Gordon said in a note.

On the demand side, UBS flags softer conditions in China, where unwrought copper imports fell to multi-year lows in 2025, dropping 6.1% from the prior year as rising prices curbed buying interest. With the Chinese New Year approaching, seasonal factors are expected to slow purchasing activity further in the near term.

At the same time, inventories at the Shanghai Futures Exchange have risen by around 80,000 metric tons since the end of last year, in line with typical first-quarter seasonal builds.

Looking beyond the near-term pause, strategists said a recovery in Chinese demand after the holiday period, supported by anticipated stimulus measures, should help underpin prices.

“The Politburo meeting in December reaffirmed domestic demand expansion as a principal objective for 2026, and additional stimulus measures are anticipated to further strengthen consumption,” they noted.

Supply constraints remain a key pillar of the longer-term bullish view, with Chile facing declining ore grades and operational challenges, while Peru has struggled to lift production. Major producers have revised output forecasts lower, reinforcing expectations that supply growth will remain limited this year.

Tight conditions in copper concentrate and scrap markets are also expected to restrict refined output, with UBS projecting a market deficit of about 407,000 metric tons in 2026.

“Consequently, inventories are likely to fall, pushing copper prices toward $14,000 per metric ton or above,” Schnider and Gordon said.

Speculative positioning had become elevated during the recent rally and has started to unwind, a dynamic that could keep prices consolidating near $12,500 per metric ton in the first quarter, strategists added.

However, they stressed that the underlying supply-demand backdrop remains tight and does not point to a reversal in the broader price trend, adding that any pullbacks could offer opportunities to add exposure.
Source: Investing.com