With the benchmark LME 3-month copper price currently trading above US$12,100/t, Australia’s mining majors, BHP and Rio Tinto, are entering 2026 on strong footing.
While record commodity prices usually raise volatility concerns, the copper deficit means higher prices could be with us for a while.
The Macro Picture: 2026 Deficits and Inventory Stress
The copper market is forecast to remain tight in 2026. JP Morgan is modelling a refined copper deficit of 330,000 tonnes (kt) for 2026, driven by a mix of aging assets and a decade of exploration underinvestment. Copper, we should note, is also getting more expensive to mine (graph below from the Federal Reserve illustrates this).
Disjointed inventory is making this worse.
Disproportionate amounts of copper remain in US warehouses following the tariff pre-empting surge of 2025. This has left ex-US inventories thin, meaning any sudden uptick in Chinese demand could trigger a “squeeze” toward US$13,000/t. This is why copper traders have been more sensitive than usual about China’s economic outlook.
Copper and BHP in 2026
If there is a primary ASX winner of the current copper breakout, it is BHP in my opinion.
Over the last two years, BHP has tilted towards copper, which now accounts for an estimated 45% of its group EBITDA sensitivity. For shareholders the numbers look good: for every US$100/t move in the copper price, BHP’s EBITDA shifts by approximately US$220 million to US$260 million.
With prices having climbed from US$9,000/t to over US$12,000/t in the last six months, the company is effectively capturing several billion dollars in windfall cash flow.
Operationally, the flagship Escondida mine is performing well. There has been more throughput and improved recovery rates.
What the market dislikes about BHP copper is that it is facing ore grade declines at Escondida and Olympic Dam. It therefore sits increasingly high on the cost curve. And unlike copper pure plays Ivanhoe and Antofagasta, BHP did not stick the knitting in early and build its copper reserves when prices were lower. This all works together to create lower margins and less earnings convexity.
BHP has responded to this in a very BHP way. It has pulled forward roughly 400 kt of production through 2030 by rephasing expansion schedules and gone hunting for acquisitions.
With net debt at the lower end of its target range and annual capital expenditure capped at roughly US$11 billion, the likelihood larger dividends is meaningfully higher this year.
BHP’s historical tendency to pay out more than its 50% minimum when commodity prices cooperate suggests a yield event could brew.
Copper and Rio Tinto in 2026
While historically playing a smaller role at Rio than at BHP, copper is emerging as a meaningful driver of Rio’s earnings.
The company is guiding copper production of 800–870kt in 2026, underpinned by the ongoing ramp-up at Oyu Tolgoi in Mongolia. Once fully operational later this decade, Oyu Tolgoi is expected to produce around 500kt per annum, placing it among the world’s largest copper mines.
Markets are forward looking. And seeing that incoming scale, they are treating Rio more as a copper story.
Rio estimates that every US$100/t move in the copper price shifts EBITDA by roughly US$130–180 million. At prices closer to US$12,000/t, copper starts to rival iron ore as the key swing factor in group earnings.
What makes this particularly interesting is how Rio is choosing to fund growth. Rather than relying on operating cash flow or issuing debt, new boss Simon Trott is selling assets. That allows Rio to maintain its long-run payout ratio of around 60%, meaning a larger chunk of copper profits can be returned directly to shareholders. Perhaps that’s the whole point.
BHP and Rio rerate scenario in 2026
Despite their massive copper output, the market continues to price BHP and Rio primarily as iron ore companies. And Glyn Lawcock over at Barrenjoey reminds us that the best days of Aussie iron ore mining are likely behind us. (Glyn’s interview with the ABC in late-November is here).
In 2025, the Global Copper Miners Index rose by 55%. But BHP and Rio saw only modest gains. However, this valuation lag has sharpened an already existing yield advantage. Ivanhoe, Antofagasta, Freeport-McMoRan and Southern Copper trade at higher multiples and offer smaller yields, the Aussie majors provide a combination of (increasingly) copper price "torque" and dividends.
As copper prices are looking more likely to stay “higher for longer”, the valuation gap between these companies is likely to close. If copper stays above US$12,000/t in 2026, I believe the market will be forced to re-rate BHP and Rio.
Another way to play the theme
Ultimately, bumper copper demand is being driven by AI data centres, and electric cars, which centres on the US technology system. For those wanting access to US tech, the ETFS US Technology ETF (ASX: WWWW), invests in the semiconductor and software leaders whose growth is underpinning these trends.
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