SANTIAGO, April 12 (Reuters) - Copper's bull run should

continue for at least the next three years, fueled by global

supply challenges and hot demand for the metal to power energy

transition and artificial intelligence technologies, industry

analysts say.

The outlook is an optimistic harbinger for Freeport-McMoRan ( FCX )

, BHP and other producers as decarbonization and

technological shifts fuel copper's latest demand wave after

China's rise powered a similar one two decades ago.

But with question marks hanging over a number of key

projects, some estimate production will struggle to meet that

demand.

These themes are expected to dominate conversations in the

Chilean capital of Santiago at the CRU World Copper Conference

from April 15-17, the largest annual gathering of industry

executives, investors and analysts. Chile is the world's biggest

copper producer but its output has faltered in recent years.

Copper, one of the best electrical-conducting metals, is

already used worldwide in motors, batteries and wiring, and

nicknamed "Dr. Copper" because demand for it is widely seen as a

barometer for global economic health.

Data centers to power AI servers will likely require an

additional 1 million metric tons of copper by 2030, commodity

trader Trafigura said this week. Further new demand is also

expected to come from electric vehicles, which are built with

four times more copper than vehicles with internal combustion

engines.

"Copper's second secular bull market this century is taking

hold," said Citi analyst Maximilian Layton, who expects demand

to outstrip supply by 1 million metric tons during the next

three years. "Explosive price upside is possible over the next

two to three years."

In a report published earlier this week, Layton and Citi

said they expect copper prices to touch $12,000 a metric

ton by December 2026, a forecast echoed in a similar report from

Bank of America. Prices traded near $9,378 a metric ton on

Wednesday, near a 14-month high.

Citi encouraged automakers and others to hedge their copper

purchases, warning that the price jump could cost unhedged

manufacturers an overall $320 billion, equivalent to roughly

0.4% of global GDP.

Factoring into the bullish price forecast are recent

production struggles by First Quantum, Ivanhoe Mines ( IVPAF )

, Anglo American Codelco and others. Electricity

supply challenges in Zambia, Africa's second-largest copper

producer, also loom.

As a result of these setbacks, Citi cut its forecast for the

global copper supply this year to an increase of just 0.7% from

its previous forecast for a 2.3% rise.

"The much-discussed lack of mine projects is becoming an

increasing issue for copper," said Bank of America analyst

Lawson Winder.

SUPPLY CHALLENGES

One of the biggest recent shocks to the copper market came

late last year when Panama ordered First Quantum to shutter its

Cobre Panama mine, which supplied roughly 1% of the world's

copper. The Canadian miner has started arbitration with Panama's

government, but analysts do not expect the mine to reopen - if

at all - until 2029.

"That was a major catalyst for a tightening in the market,"

said Jonathan Beigle of Ridgeline Royalties, which buys

royalties of copper, lithium and other critical minerals

producers. Beigle expects copper prices to eclipse $12,000 per

metric ton within a few years.

In Arizona, Rio Tinto's plan to open one of North

America's largest copper mines is mired in complex litigation.

The project last month received a favorable court ruling that is

expected to be appealed to the U.S. Supreme Court.

Chile's own copper production is likely to be a major focus

during the conference. State-controlled Codelco, which accounts

for a quarter of Chile's copper production, has been plagued by

operational issues that have pushed its output to the lowest

level in 25 years.

Regulatory uncertainty from the administration of President

Gabriel Boric, a leftist who has had a tense relationship with

the mining industry since his 2022 inauguration, initially

affected investment, but Boric has been working to mend fences.

"The investment climate has improved a lot in Chile," said

Kathleen Quirk, the incoming CEO of Freeport-McMoRan ( FCX ), which had

paused an expansion of a mine project in the South American

country. "It had been great for a long period of time. Then in

2022 and 2023 it hit some bumps, but now it's much more

positive."