Copper set for tight market in 2026 and gold miners have more room to run, says UBS

UBS expects copper to enter a supply-driven deficit in 2026 as refined output growth slows for a second year, tightening both concentrate and scrap markets, driving inventory drawdowns and upward price pressure; top copper equity picks include Freeport-McMoRan, Anglo American, Teck and Capstone. The bank is also bullish on aluminium and incrementally more positive on lithium after a sharp upgrade to 2030 demand forecasts driven by stronger-than-expected energy storage, naming Albemarle, Liontown and Mineral Resources as preferred lithium plays. UBS remains constructive on gold miners—citing record free cash flow, improving operational performance and capital discipline—and sees scope for selective multiple expansion (favored names include Barrick, Newmont, AngloGold Ashanti and Endeavour), but cautions valuations are less compelling than early 2025. Overall, UBS does not expect a broad commodities rebound given weak developed-market construction/auto/manufacturing demand and China’s property-led constraints; it sees continued nickel oversupply and an iron-ore surplus by 2027 (Rio, BHP, Fortescue rated neutral), implying selective exposure to industrial metals over bulk cyclicals.

Analysis

UBS forecasts copper will move into a supply-driven deficit in 2026 as refined output growth slows for a second consecutive year, tightening both concentrate and scrap markets and prompting inventory drawdowns that should support further price upside; the bank's top copper equity picks are Freeport-McMoRan, Anglo American, Teck and Capstone. Aluminium and lithium are expected to outperform on constrained supply and upgraded demand profiles — UBS cites capacity caps in China, smelter closures in Mozambique and disruptions in Iceland for aluminium, and a sharp upgrade to lithium demand through 2030 driven by stronger-than-expected BESS (battery energy storage system) uptake, naming Albemarle, Liontown and Mineral Resources as preferred plays.

UBS is constructive on gold miners heading into 2026 because miners are delivering record free cash flow, improving operational reliability and showing capital discipline, which could drive selective multiple expansion for names such as Barrick, Newmont, AngloGold Ashanti and Endeavour despite valuations being less compelling than early-2025. The bank cautions it does not expect a broad-based commodities rebound given weak developed-market construction, auto and manufacturing demand and China’s property downturn and slowing exports will cap demand; UBS also sees continued nickel oversupply and projects an iron-ore surplus by 2027 as Simandou ramps, with prices trending toward $90/t. Market signals register mildly positive sentiment (0.28) with modest market impact (0.38), implying selective rather than blanket commodity exposure.

Key Decisions for Investors

• Overweight select copper equities (FCX, Anglo American, Teck, Capstone) to play the anticipated 2026 supply-driven deficit while scaling in to manage execution risk
• Add targeted lithium and aluminium exposure (consider ALB, LTR, MIN or equivalent upstream names) to capture structural BESS demand upgrades and constrained supply, size positions for project and permitting risk
• Increase selective exposure to large-cap gold miners (Barrick, Newmont, AngloGold Ashanti, Endeavour) given record FCF and capital discipline, but limit position size due to less compelling valuations versus early 2025
• Remain neutral or underweight bulk cyclicals and nickel/iron-ore exposures (Rio, BHP, Fortescue) ahead of a projected iron-ore surplus by 2027 and continued nickel oversupply
• Monitor three high-frequency indicators to adjust positioning: refined output and inventory drawdowns for copper, BESS demand and lithium supply updates, and China property/exports data for broad commodity demand signals