Copper supply issues are expected to continue as prices stay close to recent highs, according to Commerzbank. Data from China reveals ongoing weak demand in manufacturing and construction, but industrial output remains strong and is on the rise. A recent 10 percent cut in US tariffs on Chinese goods wasn’t included in the latest survey. Furthermore, Chile’s copper mine output fell in September, and overall metal production fell short of expectations, according to a Reuters survey. These factors indicate that supply concerns will persist, limiting how much copper prices can drop in the short term. Recovery from copper’s record high seem hindered by ongoing supply chain problems. We view the recent drop in copper prices from above $11,000 per tonne as a short break, not the beginning of a major decline. Supply concerns are too significant and will likely continue in the upcoming weeks. This creates a price floor, which restricts the potential for further declines. The supply situation is tight, with Chile’s state-owned Codelco reporting an 8% year-over-year drop in its output for the third quarter, following a trend we have observed this year. These production shortages are not unique; we are also watching potential disruptions from labor talks in Peru and energy limitations in Zambia’s copper belt. These challenges strengthen the view that the market has little room for further disruptions. On the demand side, we aren’t overly worried about China’s recent PMI figures, which show a slight contraction in manufacturing. We have seen similar patterns in 2024 and 2025, where official PMI data doesn’t fully reflect the strength in certain sectors, such as electric vehicles and renewable energy infrastructure. The recent 10% cut in US tariffs on some Chinese goods should also slightly boost industrial demand leading into 2026. For derivative traders, this suggests that selling out-of-the-money puts may be a good strategy to earn premium, as ongoing supply issues create a strong support level. Buying call spreads on dips could allow for gains during potential price surges while managing risk. We believe that taking aggressive short positions is particularly risky until there’s clear evidence of a major increase in supply or a significant drop in actual demand.

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