JP Morgan sees $5.50 copper, deficit worsening

J.P. Morgan has raised its long-term copper price forecast by 9.1% due to widening structural supply deficits and sharply higher capital costs that will require massive investment in new mine development in the coming years.

Copper is now expected to average $12,000 (C$16,320) per tonne, or $5.50 per lb., over the next decade, up from a previous target of $11,000 per tonne, J.P. Morgan’s European metals, mining and commodities analysts wrote in a note published Wednesday. Some $150 billion in capital spending will be needed to advance more than 30 major greenfield and brownfield copper projects globally that together represent 5 million tonnes per year of new capacity, the investment bank calculated.

Following years of underinvestment, long permitting timelines and declining ore grades, the global copper market deficit will widen to about 2 million tonnes by 2030 and reach as much as 8 million tonnes by 2035, J.P. Morgan calculates. About 17 years are now required to bring a copper project from discovery to full production, up from about 10 years in 2000, according to BHP (ASX, LSE: BHP) estimates.

“Higher-cost new supply needs far higher prices,” London-based mining analyst Patrick Jones and his J.P. Morgan colleagues said. Many future projects will need copper prices above US$12,000 per tonne to achieve an internal rate of return of roughly 15%, they wrote.

Industry warnings

J.P. Morgan’s prediction of tighter supply echoes similar warnings from leading industry executives. BHP and Rio Tinto (LSE: RIO) have both forecast demand growth of more than 70% by 2050, which would lift global demand for refined copper to about 55 million tonnes.

Future copper projects are now projected to cost about $27,000 per tonne of annual capacity — a 30% increase from 2020, the investment bank says. Greenfield development costs often top $30,000 per tonne, with cost inflation for some projects now pegged at almost 50% since 2020.

Argentina – which J.P. Morgan calls “the next major copper frontier” – stands out as a crucial emerging source of supply growth. President Javier Milei’s midterm election win last year should solidify pro-market reforms and boost foreign direct investment, the analysts said.

Key projects under development in the country include McEwen Mining’s (NYSE, TSX: MUX) Los Azules; Glencore’s (LSE: GLEN) Mara and El Pachón; and the Vicuña joint venture between BHP and Lundin Mining (TSX: LUN).

Datacentre boost

On the demand side, global copper consumption should grow by about 3% annually by the end of the decade even as Chinese usage slows, J.P. Morgan says.

Electrification, renewable energy, electric vehicles and the rapid buildout of artificial intelligence and datacentre infrastructure are all expected to drive long-term appetite for copper.

Datacentre demand for copper could quadruple to nearly 1 million tonnes per year by 2030, J.P. Morgan predicts. Artificial intelligence-related power capacity could require between 20 and 40 tonnes of copper per megawatt, underlining the red metal’s critical role in digital infrastructure and the energy transition.

Supply disruptions – including last year’s landslide at Freeport-McMoRan’s (NYSE: FCX) Grasberg mine in Indonesia – have already tightened the market. Some 800,000 tonnes per year of mine losses in 2025 and 2026 have shifted the market from a modest surplus into a deficit earlier than previously expected, accelerating the onset of long-term structural shortages, J.P. Morgan says.

Bullish outlook

All these factors strengthen the bullish outlook for copper producers and mining equipment manufacturers. J.P. Morgan remains overweight on major copper miners such as Antofagasta (LSE: AFL), Rio Tinto and First Quantum Minerals (TSX: FM) – as well as several original equipment manufacturers, which should benefit from accelerating order momentum and rising capital expenditure across the sector.

With global mining capital spending already near cyclical highs and more than half devoted to sustaining existing operations, competition for capital will intensify, the bank warns. Unless investment in new copper supply accelerates soon, the industry is likely to face a prolonged period of tight markets and elevated prices, J.P. Morgan concludes.