Deutsche Bank warns: Severe supply disruptions + major industry consolidation, copper market deficit may continue next year

Deutsche Bank's analysis clearly points out that the global copper market is facing a supply squeeze. Against the backdrop of accelerated industry consolidation, severe supply disruptions have pushed copper prices close to historical highs.

According to the Chase Trading Desk, on November 30, Deutsche Bank reported that due to severe supply disruptions and accelerated industry consolidation, mine supply is expected to decline in 2025, with only a rebound of about 1% the following year, putting the market in a "clear deficit state."

• Impact on Investors: This assessment directly led Deutsche Bank to raise its copper price forecast for 2026 to $10,600 per ton, expecting peak prices to exceed $11,000 per ton in the first half of 2026. The copper market has entered a new phase dominated by incentive pricing. Investors should closely monitor the upcoming "Capital Markets Day" (CMD) of several major mining giants, especially Glencore, whose movements in mergers and acquisitions (M&A) and an expected free cash flow yield of up to 10% (2026E) make it a market focus.

• Key Company Dynamics: Glencore will hold its first CMD in two years, aiming to restore market confidence in its operational capabilities; Rio Tinto will focus on simplifying operations and capital discipline. Additionally, Deutsche Bank has listed Anglo Teck, Glencore (GLEN), and Freeport (FCX) as preferred stocks.

On December 1, the London copper price reported $11,279 per ton, setting a new historical high.

Copper Market Outlook: Supply Shortage is a Foregone Conclusion

Although the report also highlights risks, such as concerns over the "artificial intelligence bubble," Deutsche Bank believes that unless there is a severe slowdown in the global economy, the incentive pricing mechanism for copper prices will continue to exist. The long-term driving forces behind this are:

1. Electrification and Digitalization Trends: Global electricity demand growth in 2024 has already exceeded GDP growth and is expected to continue expanding at a healthy pace.

2. Slow Approval of New Projects: The approval speed for new copper mine projects may still be below the level needed to meet future demand.

Based on the above analysis, Deutsche Bank has listed Anglo Teck, Glencore (GLEN), and Freeport (FCX) as industry preferred stocks. At the same time, it adjusted its preferences for base metal companies, raising the rating of Boliden (BOL) to "Buy" and lowering the rating of First Quantum (FM) to "Hold."

Glencore (GLEN) Capital Markets Day: A Return of the King or Another Agenda?

Glencore will hold its first "Capital Markets Day" (CMD) since 2022 on December 3, an event that has attracted significant market attention. After several years of weak production, Glencore hopes to restore investor confidence in its operational capabilities through this event and showcase growth options for its copper business Deutsche Bank believes that if Glencore limits its 2026 production guidance downgrade to the copper business (which the market already expects) while maintaining its recovery targets for 2027/28 and keeps its industrial capital expenditure guidance (excluding unapproved large projects) within the range of USD 6 billion to 7 billion, this update may be positively welcomed by the market.

However, the "elephant in the room" during the event will be the topic of mergers and acquisitions (M&A). Glencore has previously actively sought large deals, and Deutsche Bank believes that its management is open to spinning off parts of its business (such as coal) for the "right deal." The report also mentioned recent news that Glencore is in talks to sell its Kazzinc business. In terms of valuation, Glencore's estimated spot free cash flow yield for 2026 is as high as 10%, ranking first among major miners, making it highly attractive.

Rio Tinto (RIO) and Other Miners: Focus on Capital Discipline and Asset Divestiture

Rio Tinto will hold its "Capital Markets Day" on December 4, and the market expects its focus to be on simplifying operations, capital discipline, and divesting non-core assets. Deutsche Bank expects Rio Tinto to reaffirm its group capital expenditure guidance of USD 10 billion to 11 billion per year (and possibly reduce it to below USD 10 billion in the medium term), while it may also introduce cost targets and update its plans to sell several smaller divisions (including borates and titanium dioxide businesses).

Additionally, Rio Tinto will provide its first production guidance for 2026, with guidance on the Simandou project being closely watched, as the market is concerned that the project may lead to oversupply next year. Overall, Deutsche Bank expects no significant changes in Rio Tinto's group strategy.

Several other miners will also hold events this week, including Vale's (VALE) CMD on December 2 and Boliden's project and capital expenditure update on December 5. Furthermore, the merger vote for Anglo Teck will take place on December 9