THE WASHINGTON POST: Copper set to give Australia’s mining stock rally a new engine

Australia’s mining stocks are poised to extend their rally, analysts say, as surging copper demand for power infrastructure and artificial intelligence gives investors a new reason to buy the sector.

The mining sector, the S&P/ASX 200 Index’s best-performing sub-gauge over the past year, is shifting beyond long-dominant iron ore as miners turn to copper for growth. At BHP, copper recently accounted for more than half of full-year revenue for the first time as prices hit a record, while earnings growth remained negative at iron ore-heavy Fortescue.

That shift is set to accelerate as AI data centres, electrification and expanding power grids drive copper demand, while China’s property slowdown weighs on iron ore. Australia’s biggest miners may now increase their exposure to copper as they look to diversify beyond the commodity that has long driven the sector.

“The cut and thrust of it is that copper demand is growing while iron ore isn’t, and the market is rewarding that,” said David Tuckwell, chief investment officer at ETF Shares in Sydney. Looking at the latest earnings from Australia’s largest miners, “the pivot to copper is well and truly under way”.

BHP is not alone in seeking a bigger share of the world’s copper, with peers including Rio Tinto pursuing similar strategies as they seek to capitalise on higher prices driven by tight supply, surging demand from the AI boom and trade disruptions from tariffs. BHP’s push to increase its copper exposure was behind its attempted takeover of Anglo American, which collapsed last year.

The contrast with iron ore is becoming sharper. Prices have remained relatively muted as China’s property market struggles to recover following its downturn during the pandemic. The nation’s latest new-home residential data showed prices are still depressed, even as policymakers introduce measures to support the sector.

Even so, investors that are seeking pure copper exposure may have relatively few options in Australia, according to some analysts.

“If you want size, quality and scale, the ASX is not where you need to be when it comes to copper,” said Dylan Kelly, head of research at Terra Capital Holdings.

For “large-scale producers with long lives, extremely low cost and a variety of choice, you’ve got to be in Canada,” he said, adding that the firm holds a minor position in Perth-based FireFly Metals.

Still, growing copper exposure offers investors another way to tap the AI boom driving global stocks to records, while providing scope for further gains in Australian miners. Demand is expected to rise as spending on data centres and power grids accelerates, while proposed US tariffs and falling Chilean production add to supply pressures.

“There is a structural deficit in the copper industry as a whole,” said Jessica Leung, a portfolio manager at Global X Management. Combined with the growing appetite for the metal with the AI build-out, Australia’s mining sector is now pivoting to “where they see the next leg of growth.”