4 brokers on the ASX's hottest sector and the stocks best placed for 2026

The materials sector has been the strongest performer on the ASX this year, by far, rallying 30%. What makes this performance so notable is not simply the scale of the gains, but the reasons behind them. This has not been a demand-led boom. It has been a supply-driven tightening that has rippled across metals, miners and markets in ways few predicted 12 months ago.

Now, with 2026 approaching, four major brokers have weighed in with research notes. Barrenjoey, UBS, Morgan Stanley and Citi each bring a different lens, yet they arrive at a surprisingly consistent conclusion.

The supply backdrop remains tight. Demand is strengthening in structurally important parts of the global economy. And many of the forces that supported materials in 2025 look set to extend into the new year.

A backdrop defined by supply scarcity and emerging demand

• Barrenjoey captures the mood of the market early in its note. Most commodities, they write, are now "tighter than we expected, mainly on supply-side factors." This tightening has prompted the firm to lift its 2026 forecasts for several metals, including gold, copper, zinc and metallurgical coal. A trend that was once expected to fade has instead entrenched itself.
• UBS sees similar signals in China, which remains the heartbeat of global commodity flows. Their tracking of copper concentrate imports shows volumes running 8% higher year-to-date. This is a clear indication that smelters are still competing for feedstock, which keeps the global market from loosening. Even rare earth exports have picked up. UBS notes a 27% month-on-month rise, suggesting stabilising trade relations rather than the fragmentation many feared.
• Morgan Stanley takes the long view on rare earths. Although geopolitical tensions have eased temporarily, the broker points out that the longer-term policy agenda in the United States, Europe and Australia continues to push strongly toward diversification away from China. As they write, the "direction of travel remains unchanged." New capacity is being built. Government-backed financing is flowing. Pricing power in the sector is likely to shift toward the most efficient producers.
• Citi adds a wide-angle global perspective and places copper and aluminium firmly at the centre of the 2026 story. They argue that the energy transition and the rapid expansion of data centres are transforming the demand profile of these metals. As Citi puts it, "We are bullish copper to $13,000 per tonne over the next six to twelve months" and aluminium to $3,500 per tonne by 2027. 

Both metals, in their view, are structurally constrained on the supply side while positioned at the heart of multi-year electrification trends.

Where brokers converge: copper, gold, lithium and the majors

Despite using different frameworks, the four brokers arrive at similar conclusions across several key commodities. That level of consistency is rare and worth highlighting.

Copper is the most consistently supported opportunity across the reports. 

Barrenjoey upgrades its price assumptions and highlights both Sandfire (ASX: SFR) and Capstone Copper (ASX: CSC) as leveraged exposures. UBS goes one step further, naming Capstone as its preferred ASX copper play based on valuation and earnings leverage. Citi’s bullish macro view provides further support and reinforces the idea that copper sits at the centre of a multi-year investment cycle. Even Morgan Stanley, through its analysis of magnet metals, indirectly strengthens the narrative by pointing to the long-life demand profile that underpins copper-intensive technologies.

Gold also stands out. Barrenjoey has raised its gold price expectations and favours Capricorn Metals (ASX: CMM), Ramelius Resources (ASX: RMS), Greatland Gold (ASX: GGP) and Newmont (ASX: NEM) as its preferred exposures.

UBS also highlights Newmont but does not extend that preference to CMM, RMS or GGP. Citi is more cautious on precious metals overall, but notes that mergers and acquisitions are accelerating across the gold sector - activity that often signals improving corporate confidence even if the fundamental outlook remains mixed. The underlying message across the brokers is that gold continues to generate cash and offer defensive qualities in an uncertain macro environment.

Lithium, after a difficult year, is beginning to stabilise. Barrenjoey expects prices to improve from current levels and prefers IGO (ASX: IGO) and Mineral Resources (ASX: MIN). 

UBS sees encouraging signs in battery energy storage demand and backs Liontown (ASX: LTR) and Mineral Resources. Although the recovery will not be linear, both brokers believe the market is moving away from the most acute phase of the downcycle.

All roads also lead back to the diversified miners. Barrenjoey notes that the majors have lagged specialist producers this year and now look more attractive on valuations. UBS echoes the point. Citi, with its global bias toward copper, naturally leans toward diversified producers with pipeline strength. Taken together, Rio Tinto (ASX: RIO) emerges as the most broadly supported large-cap.

Where they diverge: coal, rare earths and aluminium

There are meaningful differences across the four reports, and they point to areas where investors need to be more selective.

• Coal is the largest divergence. Barrenjoey expects stronger coal prices in 2026 and favours Whitehaven Coal (ASX: WHC) and Stanmore Resources (ASX: SMR). UBS takes the opposite view and believes new supply will weigh on the market over the next six months. This reflects competing assumptions about the timing of new production and the resilience of global demand.
• Rare earths also split opinions. UBS interprets rising export volumes as a sign of near-term improvement in trade flows. Morgan Stanley cautions that the enormous investment now entering the ex-China supply chain will reshape the pricing environment over the medium term. While Iluka (ASX: ILU) and Lynas (ASX: LYC) hold strategic advantages, higher-cost entrants may face a more challenging path.
• Aluminium is another fault line. Barrenjoey and UBS do not treat it as a major theme. Citi, by contrast, elevates aluminium to the same level of importance as copper. They argue that it is central to United States infrastructure spending and the data centre boom, and that supply constraints are more significant than the market currently appreciates.

The most investable themes for 2026

Bringing the four outlooks together creates a clear picture of where the strongest opportunities lie. Copper leads the list, followed by gold, stabilising lithium and a more attractive set of diversified miners. Outside these core exposures, uranium remains supported through companies such as Paladin (ASX: PDN), while rare earths require a more selective approach focused on Iluka and Lynas.

These are the areas where broker support overlaps most consistently:

• Copper: Sandfire and Capstone
• Gold: Capricorn Metals, Ramelius, and Newmont
• Lithium: Mineral Resources, IGO and Liontown
• Diversified miners: Rio Tinto
• Uranium: Paladin
• Rare earths: Iluka and Lynas

Coal and aluminium sit at the edges of the consensus, offering opportunity but with more uncertainty and greater disagreement among analysts.

If 2025 was the year when supply-side tightness surprised the market, the broker research suggests that 2026 may be the year when the themes become more entrenched. 

The materials sector has already done the heavy lifting for the ASX this year, but the foundations for further strength remain firmly in place.