Copper supply issues are set to continue as the price remains near its recent high, according to Commerzbank. Data from China shows ongoing weakness in manufacturing and construction, but industrial output is unscathed and has been climbing.
A recent 10 percentage point reduction in US tariffs on Chinese goods was not considered in the latest survey. Additionally, Chile’s copper mine output dropped in September, and metal production fell below expectations based on a Reuters survey.
These factors suggest that supply concerns will persist, keeping copper’s downside potential limited in the short term. Overall, recovery from copper’s record highs appears curtailed by ongoing supply chain issues.
We see copper’s recent pullback from its record high above $11,000 per tonne as a temporary pause, not the start of a major correction. Supply concerns are simply too strong and are expected to persist in the coming weeks. This creates a floor under the price, limiting how far it can fall.
The supply picture remains tight, as Chile’s state-owned Codelco just reported an 8% year-over-year decline in its third-quarter output, continuing a trend we have watched all year. These production shortfalls are not isolated, as we also monitor potential disruptions from labor negotiations in Peru and energy constraints in Zambia’s copper belt. These issues reinforce the view that the market has a thin buffer against any further shocks.
On the demand side, we are not overly concerned by China’s latest PMI figures showing a slight contraction in manufacturing. We have seen this pattern before in 2024 and 2025, where official PMI data understates the real strength driven by targeted sectors like electric vehicles and renewable energy infrastructure. The recent 10% cut in US tariffs on some Chinese goods should also provide a modest tailwind for industrial demand heading into 2026.
For derivative traders, this suggests that selling out-of-the-money puts could be a viable strategy to collect premium, as the persistent supply issues create a strong support level. Buying call spreads on dips would allow for participation in potential upward spikes while defining risk. We believe aggressive short positions are particularly risky until there is clear evidence of a significant supply increase or a sharp drop in real demand.
