UBS stays bullish on copper despite near-term soft patch in demand

Investing.com -- UBS reiterated its constructive stance on copper, arguing that the metal’s structural tightness remains intact even as the market works through a near-term soft patch in supply and demand.

The bank’s analysts led by Daniel Major argue physical markets are “balanced but not tight,” with softer China demand in some segments and an overhang from tariff-related pre-buying weighing on sentiment.

Yet mine disruptions, downgrades and renewed investor interest in hard assets have kept speculative positioning elevated.

Analysts believe that copper’s setup remains favourable into 2026. They expect demand growth of around 3% against mine and refined supply growth of less than 1%, which they say should lead to deficits, inventory drawdowns and firmer fundamentals.

However, the team cautions that the current backdrop is unlikely to support a sustained break above $11,000 a tonne in the near term.

“With demand unlikely to inflect near-term, refined output holding-up and LME net positioning elevated; in our view tighter fundamentals are unlikely to provide the catalyst for LME copper to sustainably trade above $11k near-term,” the analysts wrote.

A key driver of UBS’s outlook is the ongoing compression in global mine supply. The bank highlights a series of cuts, led by the Grasberg incident that reduced the 2026 outlook by roughly 270 kiloton (kt).

Additional weakness is expected from Collahuasi due to stripping delays and stockpile degradation, while guidance updates from Antofagasta and Teck also imply lower-than-estimated production.

Analysts note that after more than 1.3mt of disruptions year-to-date, global mine supply is now tracking essentially flat for 2025 with less than 1% growth in 2026.

On the refined side, output has remained surprisingly resilient despite tightness in concentrates and reports of limited scrap availability. China’s refined copper production is up 12% year-to-date, equivalent to a 1.4mt annualised increase.

Curtailments elsewhere, including in the Philippines, Namibia and Chile, have not been sufficient to offset this rise, analysts said. They still expect refined output growth to slow to below 1% in 2026.

Demand, meanwhile, remains mixed. UBS points to robust grid spending in China and the rest of the world, as well as solid momentum in renewables, but says there is “little evidence of an inflection point” in traditional end-markets such as construction, autos and manufacturing.

Broader China data also remains soft, and the bank does not believe the property sector has bottomed.

Still, UBS keeps a positive view on copper equities overall and sees price risks skewed to the upside over the next 12 months.

The analysts prefer Freeport-McMoRan, Anglo-Teck and Antofagasta , arguing that copper-focused miners should maintain premium valuations given the improving medium-term supply-demand balance.