Copper Bear Case?????

Hi Darren,

Bullish copper remains one of MM’s core investment views through 2026, so we disagree with the article’s overall conclusion—particularly the suggestion that investors in BHP or Rio may not have meaningful copper exposure.

That said, we are conscious that copper has become an increasingly crowded trade over recent years. However, as we have mentioned in our notes, the old adage still applies: don’t fight the tape. Structural themes can become overextended, but positioning against strong earnings momentum and improving commodity prices has often been a reliable way to generate underperformance.

That has certainly been the case so far in 2026. In a year when the ASX 200 has struggled to make meaningful progress, copper-exposed miners have noticeably outperformed:

• BHP Group (BHP) +33%
• Rio Tinto (RIO) +13%
• Sandfire Resources (SFR) +6%

The author of the article is “happily short BHP”, and while that position has enjoyed a better week, we do not agree with the broader short thesis. MM continues to believe BHP can make new highs, potentially trading toward $70 into 2027, although that would likely require another meaningful leg higher in copper.

The central argument—that BHP and Rio do not provide meaningful copper exposure because their earnings are diversified is overstated. BHP is not a pure-play copper producer, but copper has become one of its largest earnings contributors and a key driver of future growth. Iron ore can influence the group result, but diversification does not remove BHP’s copper exposure; it simply reduces the volatility associated with owning a smaller, single-commodity producer.

Similarly, a specialist copper-miner ETF is not the same as owning copper itself. It provides more concentrated exposure to copper-producing equities, but returns will still be influenced by operating costs, ore grades, capital expenditure, management decisions, funding requirements, political risk and equity-market valuations. Greater commodity purity can produce more upside when conditions are favourable, but it also introduces materially greater operational and financial risk.

Equal weighting toward smaller copper producers is not automatically superior either. Smaller miners can offer greater sensitivity to the copper price, but they often carry weaker balance sheets, single-asset concentration, less liquidity and greater sovereign and execution risk. BHP and Rio may provide less pure exposure, but their financial strength and diversified cash flows are features rather than flaws.

Ultimately, however, we must look forward rather than in the rear-view mirror. The article discusses assumptions extending as far as 2050, but we would rather focus on the next few years—anything can happen over several decades.

Our constructive copper view is based on three relatively simple points:

Structural supply deficit: Refined copper supply is growing at less than 1%, compared with demand growth of around 3%. The market is expected to move into a 300,000–400,000-tonne deficit in 2026, with that shortfall potentially widening in 2027 as mine disruptions and a lack of major new projects constrain production.

Structural demand growth: AI data centres, grid investment, renewable infrastructure and electric-vehicle adoption are supporting a multi-year increase in consumption. Data-centre copper demand is forecast to almost quadruple by 2030, while demand growth outside China is accelerating toward 5%.

Bullish price outlook: Copper has already rallied around 40% over the past year, but our expectation of a further upside is not overly fanciful if the supply deficit unfolds as expected.

The financial press is full of large, long-dated calls on copper and other commodities, and in today’s online environment they should often be treated with caution – attention and clicks are sometimes the primary objective. However, the underlying supply-and-demand argument remains supportive, and we believe it is too early to adopt a bearish stance on copper or short the likes of BHP.

The more balanced conclusion is that a specialist copper-miner ETF may provide greater copper sensitivity than BHP, Rio or a broad ASX ETF, but it also introduces greater operational, political, funding and valuation risk. BHP in particular already offers meaningful copper exposure, with the added benefit of diversified cash flows and a strong balance sheet.

Going out on a limb, MM is looking for another 10–15% upside in copper. Should that occur, we would likely adopt a more balanced short-term view, but at current levels we remain constructive.

chart

LME Copper 3-Months (US$/MT)

LAST UPDATED 16/07/2026 10:12

Close

chart

LME Copper 3-Months (US$/MT)

LAST UPDATED 16/07/2026 10:12