On 8 September there was a mud rush at the Grasberg Block Cave copper mine in Indonesia, which forms part of the world’s second largest copper mine, accounting for 4% of global supply in 2024. All mining operations have been halted and a phased restart is expected in Q4 2025. Local investigations are expected to be completed by the end of 2025. The company guided that its copper and gold production would be “insignificant” in 4Q25, operating at around 65% of pre-levels in 2026 and recovering completely only in 2027. The LME copper price closed at $10,181/t on Friday (26 September), up 2.6% in response to the announcement. We estimate there will be a total loss of app 550kt of copper mine supply as a result of the disruption. After adjusting for disruption allowances, we see a 160kt downgrade to H2 2025 global mine supply forecast and a 400kt downgrade to consensus 2026 forecast. We expect a 250-260kt loss of production from Grasberg in 2025, from previous market estimates of 700kt. The Grasberg developments and wider modelled deficits add fundamental conviction to our bullish 2026 copper price view. We are constructive medium-term copper to $12k/t over the next 6-12 months in our base case. Copper is exposed to structural energy-transition and AI trends and leveraged to a pickup in US and global growth expectations from 2026 given the prospect of a dovish Fed and related lower US real interest rates. On the demand side, Copper is highly sought after for data centers, electric wires & above all defence items. Rising geopolitical tensions, accelerating military rearmament and modernization, as well as shifting security priorities are driving a security super cycle that’s global in nature and multiyear in duration. We expect 12,000 levels to come by $12k/t by mid CY26 in a best -case scenario & by end CY26 in the base case scenario. CY27 might even see further upside towards $14k/t if global economy holds up and Fed does cut by 100 bps by Q1CY26 as we expect. The copper upswing might also be aided by weaker dollar globally, upswing in AI Capex as well as frontloaded European defence spending. With Fed focussing more on it’s employment mandate than inflation, metals are likely to do well as inflation hedges. Hence Copper prices remain supported by current macros as well.
