Copper is all the rage in 2026. Here's why and how to play it

There is an old saying that there are decades where nothing happens, and weeks where decades happen. This certainly feels true for the commodity complex right now. After years of sideways action, a broad basket of metals including copper, silver, and palladium are breaking out to multi-year, if not record, highs.

Since May 2021, copper struggled to make a meaningful break above US$5/lb. But in the past two months, its managed to cross US$6 for the first time on record.

Darko Kuzmanovic, Portfolio Manager at Janus Henderson Investors, says multiple structural forces have converged to drive prices sharply higher and support higher prices for years to come.

Kuzmanovic argues this time is different, driven by a combination of supply disruptions, geopolitical shifts, and a looming step-change in demand.

Talking tariffs

One immediate driver has been the rush to move copper into the US ahead of potential tariffs. The threat of tariffs as high as 50% on imports prompted a significant shift of material from exchanges like the London Metal Exchange to US-based Comex, with roughly 700,000 tonnes now warehoused stateside.

"When something like that happens in a short time, it starts to pull material out of all sorts of places, creating price pressure," Kuzmanovic said. A review under Section 232 in the coming weeks or months will clarify the actual tariff structure, which could either accelerate or slow this movement.

Supply disruptions pile up

Beyond geopolitics, the past 12-24 months saw major production issues across several large copper mines:

• Quebrada Blanca (Teck): Production guidance slashed 19% at the midpoint for 2025, from 210-230,000 tonnes to 170-190,000 tonnes, with further cuts forecast through 2030
• Grasberg (Freeport-McMoRan): Operations suspended last September following a mudslide that trapped workers underground, forcing the company to declare force majeure and revise copper forecasts downward for 2025-2026
• Kamoa-Kakula (Ivanhoe/Zijin): Seismic activity in May caused widespread underground flooding affecting at least 70% of current production capacity, according to Citi
• Cobre Panama (First Quantum): Remains shuttered since November 2023 after Panama's Supreme Court declared its contract unconstitutional

These disruptions are typical of what the industry calls the "production allowance", where 4–6% of total output gets impacted annually by strikes or technical issues. However, the concentration of problems last year shifted the market from a modest surplus into a deficit, a tightness expected to persist into 2026.

Even before these issues, the concentrate market (copper ore that feeds smelters) showed stress, says Kuzmanovic. Smelters were paying miners for material rather than charging their usual treatment and refining fees, reinforcing the underlying market tightness.

An investment drought

The supply crunch has much deeper roots. Since emerging from the bear market that ended in late 2015, major mining companies focused on balance sheet repair, cost-cutting, and shareholder returns rather than growth. Dividends and buybacks took priority over capital investment in new projects.

"They forgot that part of the business is to reinvest in growth," Kuzmanovic noted. "And in all of that period, copper continues to increase in demand."

On top of that, building a major new copper mine today requires long-term prices of US$4.25/lb to generate an acceptable internal rate of return (IRR) of 15% to 20%. At that price, few Western companies will commit the billions required, given the timeline and execution risks. 

Chinese companies may take a more strategic view, but Western capital needs better returns.

"Who's going to invest four or five billion into a new greenfield mine for a 13% IRR? No one," he said.

Demand drivers are strengthening

Data centres and the energy transition require massive amounts of copper for electrical infrastructure, transmission lines, and substations. AI-driven data centre buildouts alone point to material increases in copper consumption.

So the corporate world is starting to move on this. BHP's attempted takeover of Anglo American was driven primarily by Anglo's attractive copper portfolio and growth options. When that failed, Anglo responded by bidding for Teck Resources, a largely copper-focused company. The combined entity would create a major copper producer with significant scale.

"Companies want more copper exposure," Kuzmanovic said, pointing to the wave of copper-driven M&A as evidence of structural demand.

Price risks

Kuzmanovic sees copper settling into a new range of US$5 to US$6 per pound, well above historical levels but necessary to incentivise new supply. At US$5, producers generate strong cash flows that should eventually drive investment in new capacity.

The main near-term risk is what he calls "thrifting", where high prices prompt consumers to substitute aluminium for copper in applications like wiring and cables where both metals work. Recent comments from China suggest thrifting may be starting, though Kuzmanovic noted such talk often surfaces as tactical attempts to pressure prices lower.

He doesn't see a return to US$3 or even US$4 copper anytime soon if the world wants new supply built. Short-term volatility is likely, but structurally, prices appear to have reset higher.

ASX opportunities

For Australian investors, copper exposure on the local exchange is limited but growing. Kuzmanovic highlighted the main large cap names, including:

Sandfire Resources (ASX: SFR) is the largest pure-play producer at roughly 160,000 tonnes annually. The company has performed well operationally but lacks near-term growth catalysts.

Capstone Copper (ASX: CSC) is a Canadian company that dual-listed on the ASX for better valuation. Currently producing around 250,000 tonnes from Chilean operations, it has projects that could lift output to 500,000 tonnes over five years. Kuzmanovic views it as good value with solid growth in a favourable jurisdiction.

Develop Global (ASX: DVP) recently restarted the Woodlawn polymetallic mine near Canberra and is advancing the Sulphur Springs copper project in Western Australia. If execution goes well, it could produce over 50,000 tonnes annually from both operations within three years. DVP also owns the Pioneer Dome lithium project, Whim Creek base metals joint venture (20% owned) and a profitable mining services business.

Firefly Metals (ASX: FFM) is a pre-development story in Canada with a former mine site that's been significantly de-risked through exploration. The resource could support 50,000-plus tonnes annually with good grade and excellent infrastructure access. "Probably the classic takeover story," Kuzmanovic said, suggesting it may not remain independent.

Marimaca (ASX: MC2) recently completed a feasibility study on an oxide copper project in Chile and is moving toward a final investment decision expected in Q2 2026. The project would produce cathode copper on-site rather than concentrate. Marimaca's principal listing is on the TSX and made its ASX debut in September 2025.

Smaller names like 29Metals and AIC Copper exist but fall below institutional thresholds on market cap, liquidity, and reserve size.

Going global

For larger, more liquid exposure, Kuzmanovic encourages investors to look offshore. Australia is well-endowed with iron ore, coal, lithium, and gold, but most domestic copper production sits within BHP's Olympic Dam operation in South Australia, diluted within a diversified giant.

North America and Latin America offer roughly 20 established producers plus numerous exploration and development companies, from modest deposits to large porphyry systems. The ASX limitations mean serious copper exposure requires a global approach.

As the energy transition accelerates and data infrastructure demands multiply, copper's role becomes increasingly strategic. Whether through established producers benefiting from higher prices or developers racing to bring new supply online, the investment case appears increasingly compelling, and dare I say, asymmetric.