Copper closed April above US$10,800/t on the LME, a level that would’ve seemed silly two years ago and is now starting to look like a floor rather than a ceiling. The reason isn’t mysterious. Demand from grid build-outs and EV manufacturing keeps grinding higher, and the supply side has had a brutal eighteen months.

Let’s look at where the actual squeeze is happening, because the headline number hides a lot of variation.

Mine-level disruptions adding up

The Cobre Panama situation is still unresolved heading into the second quarter. First Quantum has been working through arbitration, but the mine remains offline, and that’s roughly 350,000 tonnes of annual output that the market hasn’t seen since late 2023. Add to that the slower-than-expected ramp at Quellaveco’s expansion, water-allocation disputes in northern Chile that have trimmed output at two mid-tier operations, and a soft-rock incident at one of the Indonesian copper-gold mines that knocked Q1 guidance down about eight percent.

None of these are catastrophic on their own. Together they’ve pulled probably 600,000 to 750,000 tonnes from the 2026 supply outlook compared to what analysts were modelling this time last year. The International Copper Study Group flagged the deficit in its April briefing and most of the major bank desks have followed with revised forecasts.

Smelter margins are the other story

Treatment and refining charges have collapsed. Spot TC/RCs were sitting near zero through April, with some Chinese smelters reportedly accepting negative numbers just to keep furnaces lit. That tells you concentrate is genuinely scarce, not just expensive.

The flow-on effect is that several Chinese smelters have brought forward maintenance shutdowns. We’re hearing about co-ordinated production cuts being discussed for Q3, which would tighten refined metal supply even if mine output recovers. Japanese and Korean smelters are in slightly better shape thanks to long-term contracts, but their margin compression is real.

For Australian producers shipping concentrate, the math is unusually friendly right now. Anyone with uncommitted tonnes is having a very good year.

Project pipeline isn’t filling the gap

The standard counter-argument to a supply crunch is that high prices unlock new projects. That’s true over a five-to-seven year horizon. It’s not true for 2026 or 2027.

Looking at the project pipeline, the major greenfield additions due online before 2028 are Kamoa-Kakula’s continued expansion phases, the next stage at Oyu Tolgoi underground, and Reko Diq’s first ore in late 2027 if everything stays on schedule. After that the cupboard is genuinely sparse. Permitting timelines in Latin America have stretched out, community-relations work in DRC and Zambia is more involved than it was a decade ago, and capital costs for new builds keep escalating faster than commodity prices.

A few brownfield expansions are moving. BHP’s Olympic Dam expansion plans got a fresh push in March, Rio’s Resolution project is still creeping through US permitting, and Codelco is finally getting some production discipline back at Chuquicamata’s underground. None of this changes the 2026-2027 picture materially.

What producers are signalling for H2

Looking through the latest quarterly updates, three themes keep coming up. First, capex discipline is back. Boards are approving sustaining capital but holding off on big greenfield commitments until they see how trade and tariff settings shake out. Second, hedging activity has picked up - several mid-tier producers locked in attractive prices for portions of 2026 and 2027 production during April. Third, M&A chatter is louder than it’s been since 2011. Expect at least one major copper deal announced before September.

Cost guidance has crept higher across most operations. Diesel is back above US$110/bbl in real terms in many jurisdictions, labour rates in the Pilbara and northern Chile have stepped up another bracket, and explosives pricing remains tight. C1 cash costs at the median large operation now sit around US$2.10-2.30/lb, which would have looked rich two years ago and now looks pedestrian against a US$4.90/lb price.

What to watch through Q2

Three things matter most over the next eight weeks. The Cobre Panama arbitration outcome could move 350Kt of supply either way. Chinese smelter co-ordination on production cuts will signal whether refined supply tightens further. And the next round of guidance updates from the majors in late July will tell us whether Q2 disruptions extended into the back half.

Copper isn’t going to crash from here without a serious demand shock. The supply story is too constrained, and the demand drivers are structural. The question is whether we settle into a new range above US$10,000/t or whether the squeeze pushes us toward US$12,000/t before fresh supply arrives. Bet on the higher end if you’re forced to pick.