Citi(US:C) Jin Shi Shu Ju·2025-12-05 06:29Core Viewpoint - The copper price has reached a historical high, driven by optimistic price forecasts from Citigroup and expectations of a supply shortage due to increased U.S. inventories [1][3]. Group 1: Price Forecasts - Citigroup analysts predict that the average copper price will reach $13,000 per ton by Q2 2026 due to supply gaps in other regions as U.S. inventories rise [1][3]. - Morgan Stanley expects copper prices to reach $12,500 per ton by Q2 2026, with an annual average of approximately $12,075 per ton [6]. - UBS has a more aggressive forecast, predicting copper prices will rise from $11,500 per ton in March 2026 to $13,000 per ton by December 2026 [6]. Group 2: Demand Drivers - Global terminal consumption of copper is expected to grow by 2.5% next year, driven by low interest rates, U.S. fiscal expansion, European military spending, and energy transition [3]. - The AI revolution is creating a new consumption pattern for copper, particularly in large-scale AI data centers, which require significantly more copper than traditional data centers [4]. - By 2030, global copper demand from data centers is projected to reach 400,000 tons annually, with a peak consumption of 572,000 tons by 2038, indicating an annual growth rate of 8% to 12% [4]. Group 3: Supply Challenges - Ongoing operational disruptions, such as declining ore grades and water shortages, along with community protests in major producing countries like Chile and Peru, are exacerbating supply challenges [4]. - The development cycle for new mines, which can take 17 to 23 years, is hindering rapid supply adjustments [4]. - Major Chinese smelters have announced significant production cuts by 2025 due to declining profitability, further constraining supply [4]. Group 4: Market Dynamics - The copper market is expected to enter a structural shortage in 2024, with a projected gap of 150,000 tons by 2026, driven by strong demand and limited supply [5]. - The International Copper Study Group (ICSG) indicates that the supply gap could reach 30% by 2035, highlighting copper's critical role in global supply chains for energy transition and AI expansion [5]. - Global copper inventories have surged to over 656,000 tons, the highest level since 2018, with about 60% stored in U.S. warehouses [7].