Copper craze sends miners and markets to record highs as green supercycle heats up

By early 2026, copper had decisively overtaken iron ore as the dominant earnings driver for major miners, signaling a structural shift in the industry’s focus. BHP’s copper business contributed 51% of its core EBITDA in the half-year ending December 2025, surpassing iron ore’s 48% for the first time, while Rio Tinto saw copper profits surge 114% in 2025, lifting copper’s share of profits to 30% amid an 11% decline in iron ore earnings. This transition reflects copper’s critical role in powering AI data centers, electric vehicles—which require three to four times more copper than traditional fuel cars—and renewable energy infrastructure, underscoring its emergence as the 'red metal' at the heart of the new industrial era.

The rise of copper is not merely demand-driven but also supply-constrained, as the depletion of high-grade copper deposits and the lengthy 10-15 year development timelines for new mines have created a looming structural shortage expected to begin in 2026. This contrasts sharply with iron ore, where supply continues to increase even as demand slows due to the peak in China’s property cycle. The resulting imbalance cements copper’s position as a strategic asset essential to the global shift from infrastructure-led growth to a digital and low-carbon economy, effectively making it the 'nervous system' of modern industrial civilization.

By early 2026, institutional investors have decisively shifted billions into mining and metals, with mining ETFs more than doubling their assets to $87.4 billion within a year. This surge reflects a strategic pivot away from high-valuation tech stocks toward industrial metals, driven by diversified demand from AI infrastructure, electrification, and defense spending. However, the metals markets’ inherent volatility and supply bottlenecks, compounded by geopolitical tensions such as the Iran conflict, have heightened price swings, reinforcing the appeal of industrial metals over traditional safe havens like gold.

This nascent commodity supercycle marks a departure from the China urbanization-driven boom of the 2000s, as demand now stems from a broader array of sectors including electrification, AI, and infrastructure development. The diversification of end-use drivers signals a more resilient and multifaceted market dynamic, positioning copper and other industrial metals at the core of the green transition and technological advancement.

By mid-May 2026, BHP's stock performance epitomized the copper-driven mining sector surge, with shares soaring over 55% in the past year to an all-time high of $62.30, pushing its market capitalization close to $313 billion. This rally was underpinned by copper prices climbing above US$6.40 per pound, making copper the dominant contributor to BHP’s earnings for the first half of FY26, accounting for more than half of its underlying profits. However, despite this bullish momentum, analyst sentiment was notably cautious, with 14 out of 21 rating BHP as a 'hold,' reflecting concerns that the current valuation already prices in significant optimism, even as BHP maintained a solid trailing dividend yield of 3.18%, offering stable returns to shareholders amid the rally.

Simultaneously, BHP reclaimed its position atop the S&P/ASX 200 Index, buoyed by record-high copper prices fueled by robust demand from China’s industrial activity and burgeoning AI infrastructure investments. Copper’s contribution to over half of BHP’s EBITDA highlighted the company’s strategic alignment with the green energy transition, further amplified by geopolitical tensions and supply constraints affecting key industrial metals. This shift underscores copper’s centrality not only in BHP’s financials but also in broader market dynamics driving investor interest.

Parallel to BHP’s ascent, Rio Tinto also experienced a remarkable rally, with shares hitting a fresh all-time high of $191.57 by May 14, 2026, reflecting a 59% gain over the past year and a 32% rise since March. This surge was propelled by strong copper and iron ore prices, underpinned by escalating demand linked to AI, electrification, renewable energy, and ongoing supply disruptions. Operationally, Rio Tinto reinforced its market valuation with a 9% year-on-year increase in copper production and a 13% boost in iron ore output for Q1 FY26, despite facing weather-related challenges.

Despite Rio Tinto’s robust operational growth and generally positive analyst buy ratings, the average target price suggests some potential downside risk, indicating that the current share price may have limited upside in the short term. Nonetheless, the long-term outlook remains optimistic, driven by the sustained mining boom fueled by the global green energy transition, which continues to elevate copper and iron ore as critical commodities. This nuanced valuation dynamic reflects a market balancing near-term exuberance with enduring structural demand.

By early 2026, smaller ASX-listed companies central to the green transition—such as PLS Group Ltd, Mineral Resources Ltd, and Lynas Rare Earths Ltd—had delivered staggering share price gains of up to 330%, underscoring their pivotal role in electrification and clean energy supply chains. However, despite this impressive rally, analysts from Morgans Financial and UBS Group cautioned that stretched valuations and commodity price volatility could temper near-term upside, prompting more conservative price targets and ratings like the 'trim' on PLS shares.

The broader ASX mining sector’s exposure to green transition commodities is notably diversified, with companies like Mineral Resources Ltd blending iron ore, lithium, and mining services to mitigate risks, while Lynas Rare Earths Ltd stands out as a critical rare earths supplier outside China, benefiting from geopolitical supply security concerns. This diversification across lithium, rare earths, and multi-commodity operations not only enhances growth prospects but also reflects a wider market participation beyond pure-play miners, illustrating the evolving complexity of the sector.

The copper boom of 2026 has further expanded sector-wide participation, as surging copper prices—up roughly 38% year-on-year to record highs near US$6.44 per pound—have buoyed both major players like BHP and Rio Tinto and smaller, more copper-sensitive ASX companies such as 29Metals. This price surge, fueled by robust demand from electric vehicles, data centers, and AI technologies, highlights how the green transition’s commodity demand is permeating across the mining sector, offering investors varied exposure to the copper-driven growth story.

By mid-2026, major miners are recalibrating their strategies to harness the accelerating green transition, with BHP doubling down on copper as a cornerstone of future growth. Benefiting from a 31% surge in its average realised copper price to US$5.47 per pound in Q1 2026, BHP leverages its flagship Escondida mine in Chile and Olympic Dam in Australia to solidify its role in the copper megatrend. Meanwhile, Fortescue is aggressively pursuing decarbonization, committing US$6.2 billion towards net zero Scope 1 and 2 emissions by 2030, including a US$680 million investment in the Pilbara Green Energy Project, a move that has buoyed its share price amid recovering iron ore markets and growing investor enthusiasm for sustainability.

Rio Tinto exemplifies a bold portfolio pivot, investing US$6.7 billion to acquire Arcadium Lithium and catapult itself into the ranks of the world’s largest lithium producers, a critical metal for energy storage in the green economy. Concurrently, it is scaling up copper output through the Oyu Tolgoi mine, projected to become the fourth largest globally by 2028, while also advancing the Simandou iron ore project, which shipped its inaugural cargo in December 2025 and aims for a substantial ramp-up to 5–10 million tonnes in 2026. This multifaceted expansion underscores Rio Tinto’s strategic commitment to diversify and capitalize on evolving commodity demands driven by decarbonization imperatives.

By mid-2026, Morgan Stanley projects a robust surge in copper demand driven notably by data centre construction, estimating this sector alone will consume about 760,000 tonnes in 2026 and escalate to 1.1 million tonnes by 2027. This surge could account for roughly 26% of total copper demand growth in 2026 and approach 4.9% of global demand by 2027, nearly matching electric vehicles' share at 5.1%, underscoring a significant shift in copper consumption patterns.

Amid this backdrop of rising demand, Morgan Stanley highlights BHP’s Copper South Australia expansion as a pivotal medium-term growth catalyst, with production expected to climb from approximately 320,000 tonnes per annum to over 500,000 tonnes in the first phase and potentially 650,000 tonnes longer term. This expansion is not only quantitative but qualitative, enhancing feed blending, furnace stability, acid capture, refining capacity, and precious metals recovery, positioning BHP to capitalize on the structural copper demand growth.

Reflecting confidence in BHP’s strategic positioning and the broader copper market dynamics, Morgan Stanley has set a bullish price target of $67.50 for BHP shares as of May 2026. This target underscores the firm’s conviction that BHP’s ongoing expansions and the structural growth in copper demand, particularly from emerging sectors like data centres, will continue to drive shareholder value in the evolving mining sector landscape.