Why Codelco Abandoned Its 2026 Copper Production Target — and What It Means for Global Supply

Codelco, the world's largest copper producer, has effectively abandoned its 2026 production target of 1.34 million metric tons — and the broader goal of 1.7 million tons annually — under the weight of compounding crises. The decision is not a single event but the culmination of operational failures, financial distress, and a fundamental strategic pivot.

Why Codelco Abandoned the Target

A Fatal Collapse and Seismic Suspension at El Teniente

On July 31, 2025, a rock burst at the El Teniente mine killed six workers and forced Codelco to halt production across affected areas, directly leading to a downgrade of its 2025 output forecast . A year later, in August 2026, Codelco suspended the Andes Norte expansion project at El Teniente after new technical studies detected greater seismic risk than originally understood. Codelco called it a preventive safety measure with no restart date confirmed . This project was critical to offsetting declining ore grades and extending the mine's life; its indefinite halt eliminated a key pillar of the growth pipeline .

Aging Mines, Declining Grades, and Chronic Underperformance

Codelco has missed its production targets for seven consecutive years . Output fell to a 25-year low in 2023 due to diminishing ore grades and delays in structural projects at Chuquicamata, Gabriela Mistral, and elsewhere . Chairman Bernardo Fontaine acknowledged there is "no possibility" of reaching 1.7 million tons within four to five years .

Elevated Debt and Financial Distress

As of March 31, 2026, Codelco's net debt stood at $24.7 billion, with a net debt-to-EBITDA ratio of 3.3x — improved from 4.4x a year earlier but still heavy . Gross financial debt reached $27.4 billion . Independent analysis noted that Codelco's costs are 56% higher than global peers, its EBITDA margin is only 34%, and its net debt is five times that of competitors . The company's heavy capital spending on structural projects was generating negative cash flows, making the growth-at-all-costs strategy unsustainable .

A Strategic Shift to Profitability and Debt Reduction

New Chairman Bernardo Fontaine, appointed in mid-2026, explicitly reoriented the company's strategy: profitability over volume . The four priority areas presented to Chile's Congress were: maximizing contributions to the state, austerity, long-term sustainability, and debt discipline — without increasing borrowing . In a historic move, Chile authorized Codelco to retain 100% of its 2025 profits ($2.422 billion) for the first time in more than 50 years, specifically to ease financial pressure . The company is no longer chasing tonnage; it is trying to stabilize its balance sheet.

How These Factors Combine

The debt burden meant that borrowing more to fund megaprojects was no longer viable. The El Teniente collapse and seismic suspension killed the near-term growth path from the company's most strategic asset. Fontaine's new board concluded that continuing to chase unrealistic production targets would deepen the financial hole. The result is a de facto abandonment of any growth target for the next several years — production is expected to stay flat at current depressed levels .

Implications for Global Copper Supply Deficit Forecasts

Goldman Sachs

Goldman Sachs originally forecast a 490,000-ton surplus for 2026 as of April 2026 . However, by June 2026, after Codelco's trajectory became clear, Goldman sharply revised its view. The bank now forecasts a 640,000-ton deficit in ex-U.S. refined copper markets for 2026 and a further 170,000-ton deficit in 2027 — a more-than-tenfold deterioration from prior deficit estimates . Goldman attributes roughly 350,000 tons of the supply cut to slower-than-expected recoveries at Codelco and other major operations . The bank warns this creates a supply crunch that could drive LME copper prices significantly higher .

J.P. Morgan

J.P. Morgan projected a global refined copper shortfall of 160,000 metric tons for 2026 as of early 2025 . More recent reporting indicates J.P. Morgan has since updated its view to a 330,000-ton deficit . The bank also forecasts copper prices averaging around $11,000/metric ton in 2026 .

Broader Market Context

The International Copper Study Group reversed its own earlier surplus call and now expects a 150,000-ton deficit in 2026 . Morgan Stanley forecasts an even larger 600,000-ton deficit . Codelco's inability to grow production — and its explicit decision to stop trying — is a primary driver behind these revisions. With the world's largest copper producer effectively sidelined on growth at a time of rising demand from electrification and AI infrastructure, the consensus has shifted from surplus to structural deficit.