Copper has moved into a period of consolidation after a pronounced rally, trading around $13,000 per metric ton as momentum eases. UBS strategists attribute the recent price surge mainly to concerns about possible U.S. tariffs on copper and persistent disruptions to mine supply - factors the firm says have supported the run-up in prices.
Those tariff-related risks are expected to persist through the year, UBS strategists Dominic Schnider and Wayne Gordon wrote in a note, a dynamic reflected in a buildup of COMEX inventories in the United States even as stockpiles outside the country remain consistently low. At the same time, the firm highlights weaker demand conditions in China, where imports of unwrought copper fell to multi-year lows in 2025, declining 6.1% from a year earlier as elevated prices curtailed buying interest.
Seasonal considerations may also slow buying in the near term, with the approach of the Chinese New Year typically reducing purchasing activity. Complementing those demand-side pressures, inventories on the Shanghai Futures Exchange have increased by roughly 80,000 metric tons since the end of last year, a move UBS says is consistent with standard first-quarter seasonal builds.
Looking past the immediate pause in price gains, UBS expects a rebound in Chinese demand after the holiday period, supported by anticipated policy stimulus. The strategists noted that the Politburo meeting in December reaffirmed domestic demand expansion as a principal objective for 2026, and that additional stimulus measures are anticipated to strengthen consumption - developments that should help underpin copper prices.
Supply-side constraints form another central plank of UBSs longer-term bullish outlook. The strategists point to declining ore grades and operational challenges in Chile, along with difficulties in raising output in Peru. Major producers have reportedly revised output forecasts downward, reinforcing expectations that supply growth will remain limited this year.
Tightness in copper concentrate and scrap markets is also expected to constrain refined output. UBS projects a market deficit of about 407,000 metric tons in 2026, and says inventories are likely to fall as a result, which could push copper prices toward $14,000 per metric ton or above, according to Schnider and Gordon.
The firm also cautioned that speculative positioning had become elevated during the recent rally and has begun to unwind. That adjustment in positioning could keep prices in a consolidating range - UBS suggests around $12,500 per metric ton - through the first quarter. Nevertheless, the strategists stressed that the underlying supply-demand backdrop remains tight and does not indicate a wholesale reversal of the broader price trend. They added that any pullbacks could present opportunities to add exposure.
Overall, UBSs view combines short-term pressure from higher prices, seasonal demand softness and rising exchange inventories with a medium-term scenario of constrained supply and potential demand-supporting stimulus in China, a mix that the firm believes will maintain upward pressure on prices after a period of consolidation.