BHP's share price increasingly looks like it could stay higher for longer, and for reasons that go beyond iron ore.
For much of the past five years the bear thesis has resonated: forecast declining demand for Australian iron ore from China, compounded by Chinese investment in competing supply out of Africa.
BHP's deal with China's state-backed iron ore monopsonist CMRG involved concessions, including selling some of its iron ore in yuan and paying a 1.8% agent fee to CMRG, Goldman Sachs estimates. This has relieved investors of the worst-case scenario with China.
But as BHP's pivot to copper becomes increasingly consequential, the back-and-forth with China on iron ore looks steadily less relevant.
This half marks a milestone for BHP with copper contributing the largest share of overall earnings — 51% of underlying EBITDA — the first time it has surpassed iron ore. As it has done so, its trailing price-to-earnings ratio has converged on copper mining sector averages.
Copper to the future
Copper prices have shot back up in recent weeks, driven by a combination of resilient demand out of China and traders front-running proposed US copper tariffs.
Trump’s 50% tariff on semi-finished copper (effective August 2025) and suggested 30% jump for refined copper by 2028 have created a floor for prices, as traders front-run restricted supply.
High copper prices self-evidently help BHP's share price short-term, as BHP sells its copper on global markets at spot prices.
But markets are forward looking, and what has traders more excited is the longer-term picture.
The world is running out of economically minable copper at precisely the moment it needs it most. BHP has done more than almost any other major miner to get in front of that, most visibly its Oz Minerals acquisition in 2023 when copper prices were almost 40% lower.
According to S&P Global, copper demand is projected to reach 42 million metric tonnes by 2040, a 50% increase from current levels. While a supply deficit of 10 million tonnes is expected to open by 2040, representing a 25% shortfall against projected demand.
Making sense of that: Escondida in Chile - the world's largest copper mine, operated by BHP - produces around 1.3 million tonnes per year. Plugging that gap requires creating seven Escondidas in the next 14 years, all things equal. The room for revenue growth for copper miners is enormous.
Can copper prices stay high?
What makes higher copper prices more durable is that supply cannot be dialled up quickly.
The time it takes to get a mine going is increasing. It now takes over 15 years for a copper mine to go from discovery to production. The long lead times are often blamed on regulators and activists. But shareholders and boards fighting over financing and terms are often culprits too.
What's more, very few tier-one copper deposits have been discovered in the past decade compared with previous periods. Years of weak copper prices, shareholder pressure for short-term dividends and inconsistent government support contributed to underinvestment in exploration.
This does not mean we will run into some “peak copper”-style scenario where we run out. Instead, it will be like a wet sponge that you have to squeeze progressively harder to get the same amount of water out.
Meanwhile, the cost environment for mining production remains meaningfully higher than it was at the end of last decade. Head grades in Latin America are declining, yes. But inputs like sulphuric acid, labour and electricity all trending upward too. On S&P’s numbers, the marginal cost of producing copper – which they define as the 90th percentile on the cost curve – increased 35% from 2019 – 2025.
This was the case before the Israel-Iran conflict began in June 2025, and the disruption to energy markets since has only reinforced it. When something gets more expensive to mine, the price at which it sells on the other side must rise as well.
While higher costs are obviously not intrinsically margin-expanding, they do create a barrier to entry for would-be producers who must put up even more capital to get their own mines going. Or, failing that, get acquired and reinforce the advantages of incumbency.
All signs point toward copper being a good place to be if you're a miner. And BHP being a good place to be if you're a shareholder.
