Copper: Physical Scarcity Validates Bullish Logic, Supply Curve Shifts Significantly Right

English summary

Citi maintains a strongly bullish stance on copper prices, with the core logic shifting from macro narrative to verifiable physical fundamentals. Despite cooling speculative long positioning, firm prices provide room for incremental buying. China's spot market signals extreme scarcity: This is the most critical bullish catalyst at present. China's cathode copper import premiums have risen to the highest level since 2022, SHFE inventories are near the five-year seasonal low, and the near-month contract spread has hit a two-year high. This indicates that scarcity is not due to end-demand explosion but is a hard constraint on the raw material supply side. Supply-side elasticity failure and curve rightward shift: Global mine supply growth is stagnant (expected flat in 2026). Affected by rising energy costs, subsidy phase-out, and trade restrictions, China's scrap copper imports in H1 increased only 6% YoY, far below the 40% rise in copper prices, showing that scrap copper recycling is sluggish in response to high prices, and the supply curve has shifted significantly to the right. Structural demand hedges macro volatility: Incremental copper consumption from energy transition and AI data center infrastructure alone has exceeded global supply growth.…