Group 1: Supply Forecast Changes - Goldman Sachs has lowered its global copper supply forecast for 2025 and 2026 due to disruptions at the Grasberg mine in Indonesia [1] - The bank estimates a potential loss of 525,000 metric tons of copper supply, leading to a reduction of 160,000 tons in the second half of 2025 and 200,000 tons in 2026 [3][9] - Grasberg's production is expected to decline by 250,000 to 260,000 tons in 2025 and by 270,000 tons in 2026 [4] Group 2: Impact on Freeport McMoRan - Freeport McMoRan has declared force majeure and halted mining activities to prioritize the rescue of trapped workers, with two bodies recovered so far [2] - The company anticipates very low production in the fourth quarter of 2025, with operations potentially restarting next year [5][6] - Grasberg accounts for half of Freeport's proven reserves and 70% of its projected copper and gold output through 2029, leading to a share price drop of over 21% since the update [7] Group 3: Market Implications - The disruption has shifted the global copper market from a projected surplus of 105,000 tons in 2025 to a deficit of 55,500 tons, while 2026 is expected to remain in a small surplus [8] - Goldman Sachs revised its estimates for global mine production growth for 2025 to 0.2%, down from 0.8%, and for 2026 to 1.9%, down from 2.2% [9] - The supply risks support Goldman's bullish outlook on copper prices, reaffirming a target of $10,750 per ton by 2027 [9] Group 4: Price Forecasts - Goldman sees upside risks to the December 2025 LME price forecast of $9,700 per ton, with potential prices in the $10,200-$10,500 range [10] - Current contracts are priced at $10,336 per ton, reflecting a 3% increase on the day [10]

Summary of Copper Industry Conference Call Industry Overview - The conference call focused on the copper mining industry, discussing production, inventory dynamics, and market outlook. Key Points Production Insights - Major copper miners reaffirmed their full-year production guidance for FY 2025, although some, including Freeport-McMoRan (FCX) and Teck Resources (TECK), have trimmed their forecasts. Others like Anglo American (AAL) and Glencore (GLEN) need to significantly increase production to meet their guidance [1] - In Q2 2025, copper production across major producers increased by approximately 6% quarter-over-quarter and 4% year-over-year, with a 2.5% year-over-year increase for the first half of the year [1] - Supply growth is expected to be constrained at around 2% in 2025, with notable production increases from Escondida (up 20% in 1H) but a moderation expected in 2026 [1] Inventory Dynamics - U.S. imports of refined copper surged by approximately 560,000 tons (190%) year-to-date compared to the previous year, and up 500,000 tons (150%) against the five-year average [2] - Despite increased imports, the Comex inventory build only rose by 150,000 tons year-to-date, indicating that much of the increased imports may have been accumulated as unreported inventory [2] - LME inventories fell by about 180,000 tons (65%) from January to June but have started to recover, increasing by 65,000 tons since the end of June [2] Tariff Impacts - President Trump's announcement on July 31 regarding tariffs on copper semis led to a significant drop in the COMEX premium, which could result in re-exporting built-up copper inventories if the COMEX trades at a discount to LME [3] - A material decline in U.S. imports is anticipated, which may increase supply to China and Europe, potentially raising LME and SHFE inventories in the near term [3] Disruptions and Mine Updates - El Teniente, a major underground copper mine, faced a fatal tunnel collapse on July 31, leading to a temporary suspension of operations. This incident is expected to reduce copper concentrate supply by approximately 30,000 tons per month [4] - Although operations are set to resume, production rates are expected to be lower for the remainder of 2025 and potentially into 2026 [4] Market Outlook - The medium-term outlook for copper remains bullish, but near-term caution is advised due to risks associated with U.S. tariff unwinding [5] - Recent downgrades were made for FCX, Southern Copper Corporation (SCCO), and Lundin Mining Corporation (LUN) to Neutral, while KGHM was downgraded to Sell. Conversely, ANTO, AAL, and Zijin are still considered good buys [5] Additional Insights - The report highlights that visible copper inventories are currently around 0.5 million tons, which is below the average levels of 0.75 million tons from 2010 to 2020, indicating a tight supply situation [32] - The seasonal nature of copper inventories in China was noted, with typical increases in Q1 and draws through Q2 to Q4 [34] Conclusion - The copper industry is experiencing a complex interplay of production challenges, inventory dynamics, and tariff impacts, which are shaping the market outlook. Investors should remain vigilant regarding these factors when considering investment opportunities in the sector.

Investment Rating - The report maintains a cautious outlook on copper prices, forecasting a decline towards $9,100/mt in Q3 2025 before stabilizing around $9,350/mt in Q4 2025 [2][4]. Core Insights - The tightening of copper fundamentals in 1H25 is attributed to two main factors: increased US imports ahead of potential tariffs and front-loaded demand from China [2][4]. - The report anticipates a payback in 2H25 from these dynamics, leading to a more cautious stance on copper prices for the remainder of the year [2][4]. - Visible copper inventory is described as significantly dislocated and imbalanced, rather than exceptionally tight globally [2][5]. - The US is projected to import approximately 430 kmt of excess refined copper in 1H25, which is expected to lead to a substantial inventory build [2][11]. - The report expects a multi-month de-stocking cycle in the US following the announcement of copper tariffs, which will shift supply dynamics towards Asia [2][13]. - Chinese copper demand growth has been robust at around 7% year-on-year, but is expected to slow in 2H25 due to various headwinds [2][14]. - The report highlights a potential decline in demand from the air conditioning and white goods sectors, as well as a significant slump in solar demand, which could lead to flat or slightly negative overall demand growth in China for 2H25 [2][19][24]. - Despite the anticipated unwind of tightening factors, overall copper supply growth remains constrained, supporting prices above $9,000/mt [2][25]. Summary by Sections US Copper Imports and Tariffs - The report expects a 25% tariff on US imports of refined copper and copper products to be announced by the end of July 2025 [2][27]. - Following the tariff announcement, US imports are expected to drop significantly, leading to a shift in trade flows towards Asia [2][36]. Chinese Demand Dynamics - Chinese copper demand growth is projected to be around 3% for the full year 2025, with a significant slowdown expected in 2H25 [2][14]. - The report notes that while grid demand will remain strong, other sectors such as housing and solar are likely to face challenges [2][19][24]. Price Forecasts - The report provides a quarterly price forecast for copper, estimating $9,100/mt for Q3 2025 and $9,350/mt for Q4 2025 [2][49]. - Overall, the report suggests that absent a severe downturn in the macroeconomic environment, copper prices will remain supported despite the anticipated corrections [2][25].