28 October 2025 | 7:07AM BRT Equity Research METALS & MINING Copper Equities Opportunities Following the YTD Rally Henrique Marques +55(11)3371-0778 | henrique.marques@gs.com Goldman Sachs do Brasil CTVM S.A. Copper equities have rallied by 58% YTD (COPX) as investors' confidence around a tighter supply/demand in the shorter term have increased on the back of a series of mine disruptions (e.g. FCX's Grasberg, Ivanhoe's Kakula, El Teniente, etc). The rally has also been fueled by resilient China demand, USD ...

Summary of Copper Market Analysis Industry Overview - The analysis focuses on the copper market, projecting a new price range of $10,000-$11,000 per ton starting in 2026, driven by supply constraints and structural demand growth from critical sectors [2][5][20]. Key Points Price Forecasts - The 2026 copper price forecast has been raised to $10,500 per ton from $10,000, with a 2027 forecast maintained at $10,750 per ton [2][5]. - The price is expected to remain capped at $11,000 for the next two years due to market dynamics [2][17]. Supply Dynamics - Mine supply growth is constrained, averaging +1.5% year-over-year from 2025 to 2030, primarily due to deeper mining operations and lower ore grades [2][4][34]. - Recent mine disruptions, including the Grasberg outage, have led to a projected 6% drop in global refined copper production from Q2 2025 to Q1 2026 [10][15]. - New supply is anticipated from low-capex, price-responsive mines in the Democratic Republic of Congo (DRC) and China, which are expected to meet demand in the short term [10][39]. Demand Trends - Global refined copper demand growth is forecasted to moderate from +2.8% year-over-year in 2025 to an average of +2.1% from 2026 to 2030, driven by infrastructure investments [2][63]. - Critical sectors such as grid and power infrastructure are expected to account for over 60% of demand growth, with additional contributions from defense, electric vehicles, and data centers [3][62]. Substitution Effects - There is an anticipated acceleration in the substitution of copper with aluminum in cyclical sectors, which is expected to moderate copper demand growth and cap prices [3][70]. - The copper/aluminum price ratio is projected to exceed 4:1 in 2026, further incentivizing this substitution [70]. Strategic Stockpiling - Strategic stockpiling of copper is considered essential due to its constrained resources and critical applications, particularly in the US and China [25][28]. - The US has allocated approximately $500 million for cobalt stockpiling, with potential plans for copper stockpiling estimated at $1.8 billion for 40 days of consumption [28][31]. Market Balance - The copper market is expected to remain in a small surplus until the end of the decade, with a projected deficit emerging by 2029 [18][78]. - The balance of refined production and consumption indicates a surplus of 180,000 tons in 2026, with a gradual shift towards a deficit by 2029 [78]. Risks and Considerations - If copper prices rise too quickly, it may lead to accelerated substitution and a slowdown in demand growth from cyclical sectors [17][70]. - The analysis highlights the uncertainty surrounding strategic stockpiling, suggesting that without it, the surplus could exert downward pressure on prices [32]. Conclusion - The copper market is poised for a significant price adjustment due to supply constraints and evolving demand dynamics, with strategic stockpiling playing a crucial role in shaping future price trajectories. The interplay between supply, demand, and substitution will be critical in determining the market's direction over the next several years.

Investment Rating - The report rates the following companies as "Buy": BHP.AX, RIO, GLEN, LUN, FM, CMOC, MMG, Zijin, S32, and Vale [4][25][47] Core Insights - The all-in marginal cost for the top 20 copper producers is estimated at approximately US$4.3/lb for 2024, indicating a broad support for a long-run copper price of around US$4.6/lb [1][8] - The top 20 copper producers are projected to spend over US$30 billion in capital expenditures (capex) in 2024, with Codelco and Freeport leading with approximately US$4.5 billion each [2][25] - Copper demand is expected to rise by 4 million tonnes by 2030, necessitating higher prices to support growth in mine and scrap supply to prevent market deficits [3] Summary by Sections Cost Analysis - The report presents a global copper cash cost curve, with the marginal cash cost of production estimated at approximately US$3.1/lb, influenced by various factors including inflation and ore grade decline [16][24] - The five companies with the highest all-in costs for 2024 are KGHM, Capstone, Codelco, Ivanhoe, and Teck, with Codelco's Chuquicamata mine being the most costly at around US$5.9/lb [2][12] Production and Demand Forecast - Refined copper production is projected to increase from 26,015 thousand tonnes in 2023 to 27,061 thousand tonnes in 2024, while consumption is expected to rise from 25,954 thousand tonnes in 2023 to 26,712 thousand tonnes in 2024 [31] - The report indicates a potential market balance shift, with a forecasted surplus of 349 thousand tonnes in 2024, followed by a deficit of 120 thousand tonnes in 2026 [31] Company-Specific Insights - Codelco aims to recover production volumes to 1.7 million tonnes per annum over the next 4-5 years, with significant investments in modernization and expansion [27] - Freeport's Grasberg operations in Indonesia are highlighted for their industry-leading cash cost of negative ~US$0.3/lb, despite high capex spending [27] - BHP's Escondida mine is projected to see a decline in production due to grade decline, but growth is expected to accelerate post-2030 [28]