The bear thesis for copper and BHP looks pretty flimsy

Copper's extraordinary run this year has been a bit of an egg-in-the-face for bears.

LME copper broke US$12,000 a tonne in December, US$13,000 in January and touched US$14,527.50 on January 29. Comex copper has stayed above US$6 per pound since May.

The rally has flowed straight through to a blockbuster earnings season for ASX: BHP, ASX: RIO and the other major copper producers.

That has brought the bears back out. And the obvious question for anyone still bullish is: what could go wrong?

There are three bear arguments doing the rounds. Two look weak. One is worth taking seriously.

Bear case #1: copper prices will mean-revert

Adjusted for inflation, copper has spent much – but by no means all - of the past century moving within a broad but persistent range. The spikes of the 1970s and 2000s eventually disappeared. Why should this time be different?

The argument is that mining technology continues improving. Block caving, higher recoveries and better processing can partially compensate for declining grades, meaning the real cost curve does not necessarily move dramatically higher.

Then there is the old commodity cure: high prices create their own supply. At the same time, consumers respond through substitution into aluminium, thrifting and greater scrap collection.

These arguments contain flaws. But for argument’s sake though, let's grant all of it anyway.

Assume real copper prices go nowhere for the next decade.

It still doesn't kill the equity story, because the more important part of the bull case is increasingly volume, not price.

Investors in BHP or Rio are not underwriting US$20,000 copper forever. They are buying businesses that can produce more metal. Rio increased copper production by 9% last year. If copper prices simply move sideways in real terms while production compounds at 3–5% a year against a largely fixed cost base, earnings still grow.

Mean reversion is a reasonable argument against owning the commodity directly (which few, if any, Australian investors ever do). But a weaker one against owning the miners like BHP and Rio.

Bear case #2: governments will cap the market

The second argument is that copper isn't a free market.

Governments have an interest in keeping prices within a broad band: high enough to incentivise new mines, but not so high that grids, manufacturers and consumers get crushed.

China is the obvious example. Its strategic stockpiling can support prices during periods of weakness. While China is equally known to go on buyer’s strikes when prices get too high.

That makes this a reasonable bear argument.

The problem is that 2026 has provided a spectacular example of governments pushing copper structurally higher, not within a band.

Traders have spent the past 18 months moving metal into the US ahead of Section 232 (we note this remains a moving target. Lutnick's June 30 deadline passed without a recommendation, and the White House still hasn't signalled timing). 

Comex stocks have surged to record levels, at the expense of inventory in London and China. 

Copper in American warehouses cannot satisfy a shortage elsewhere.

CRU Group, one of the most reputable metals consultancies, was forecasting a 639,000-tonne surplus for 2026. But thanks to copper getting exported to and locked up inside the US, the rest of the world's market is effectively in deficit.

Government intervention doesn't just keep commodity prices rangebound. As this year shows, it can also move the floor and ceiling higher. 

Bear case #3: this is a pull-forward

This is the bear case I take seriously.

If much of the rally is inventory relocation not end-user consumption, then today's tightness has been borrowed from tomorrow.

The physical market has unquestionably tightened. Grasberg, Kamoa-Kakula, El Teniente, and the Gresik smelter outage have all removed supply or disrupted flows. Scrap has responded, but marginal supply this year has gone to Comex warehouses not into building AI data centres, contrary to the tone of some of the commentary.

That creates a genuine resolution risk.

Once the tariff question is settled, the arbitrage disappears, US inventory can start flowing back into the international market and prices could fall. Glencore's CEO has argued that whether the eventual tariff is zero, 15% or 30%, clarity itself could trigger a sell-off.

I'd take that seriously.

But notice what it is: a timing argument not an argument about fundamentals.

It is an argument that copper could have a meaningful correction when the inventory distortion unwinds. It is not an argument that the long-term demand story has disappeared.

And for a producer, the tonnes still get mined and sold regardless of which warehouse they sit in.

The bigger point

Record prices warrant scepticism. Especially in commodities, given the history of mean reversion.

But sometimes good news is genuinely just good news. And copper investors and BHP shareholders, this year, can take the win.

Copper miners ETF

For investors wanting diversified exposure to copper miners, the ETFS Global Pure Play Copper Miners ETF (ASX: CPPR) launched this quarter with a management fee of 0.39%.