Southern Copper’s Competitive Edge: Low-Cost Production in a Tight Market

The copper market is currently characterized by a tangible supply deficit, a scenario that powerfully benefits producers with the most efficient operations. Southern Copper stands out in this environment due to its structurally low production costs, a key advantage as major financial institutions forecast sustained high copper prices into 2026. The upcoming quarterly report will be a critical test of whether the company can fully capitalize on these favorable conditions.

Market analysts are painting a picture of continued strength for the red metal. Goldman Sachs has revised its average price forecast for copper in 2026 upward to $11,400 per tonne, identifying a fundamental price floor between $10,000 and $11,000. J.P. Morgan anticipates a refined supply shortfall of approximately 330,000 tonnes for the same year. This anticipated scarcity is driven by robust demand from sectors like AI infrastructure development and grid expansion, both of which are significant consumers of copper.

Some research, including analysis from Citigroup, suggests prices could even surpass $13,000 per tonne if supply disruptions persist. These projections create a favorable backdrop for low-cost producers, offering substantial potential for profit expansion should elevated price levels hold.

Operational Efficiency Drives Margin Strength

Southern Copper's operational prowess was on full display in its third-quarter 2025 results. The company reported a remarkably low net cash cost of $0.42 per pound, after accounting for by-product credits, a significant improvement from the $0.63 per pound recorded in the prior quarter. Its gross cash cost before credits stood at $2.23 per pound. The substantial gap between these two figures is explained by high-value by-product revenues—from molybdenum, silver, and zinc—coupled with strong production volumes. This structural cost advantage buffers the company against potential price pullbacks and enhances profit margins when prices are stable.

Should investors sell immediately? Or is it worth buying Southern Copper?

Key Data Points:
* Goldman Sachs 2026 Average Price Forecast: $11,400/tonne
* J.P. Morgan 2026 Expected Supply Deficit: ~330,000 tonnes
* Q3 2025 Net Cash Cost: $0.42/lb (including by-product credits)
* Q3 2025 Gross Cash Cost: $2.23/lb (excluding credits)
* Next Earnings Date: January 29, 2026 (Q4 EPS Consensus: $1.54 vs. Prior Year $0.98)

This financial profile positions Southern Copper to capture disproportionate benefits from sustained high prices on the London Metal Exchange (LME).

Share Performance and Near-Term Catalyst

Trading at €162.90, the equity has reached a 52-week high, sitting approximately 25% above its 50-day moving average. While the overall technical picture has turned positive, a Relative Strength Index (RSI) reading of 33.1 suggests some near-term caution may be warranted.

The immediate focus for investors is the January 29 release of fourth-quarter earnings. Should Southern Copper meet the consensus earnings per share estimate of $1.54 and copper prices remain around the levels outlined by major banks, the strength of its business model is likely to be reaffirmed. Conversely, if the metal's price were to fall significantly below the support band identified by Goldman Sachs, or if unexpected operational issues arose, the company's cost advantage would serve to cushion, but not completely offset, the negative impact.