UBS Picks Copper Equities After 20% Tumble, Cites 100k-Tonne Mine Cut
UBS forecasts normalization of Strait of Hormuz flows will prevent energy-driven metals demand slump and labels copper equities—off 20% since hostilities—as the top pick, followed by gold names. Key drivers include Ivanhoe’s Kamoa-Kakula 100,000-tonne 2026-27 production cut and aluminium’s 10% price gain from smelter disruptions.
1. Ceasefire and Energy Price Risk
The announced truce between the U.S. and Iran is expected to restore tanker flows through the Strait of Hormuz, averting an energy price shock that could have triggered prolonged weak industrial metals demand. UBS sees this de-escalation as removing the biggest sector risk, paving the way for improved fundamentals across base metals.
2. Copper Equities Opportunity
Copper equities have declined around 20% since the conflict began, creating what UBS describes as an attractive risk/reward setup if energy normalization persists. Analysts highlight a 100,000-tonne annual production downgrade at Ivanhoe’s Kamoa-Kakula mine for 2026-27, and prefer First Quantum, Freeport-McMoRan, Anglo American and Teck as top picks.
3. Gold Equities Assessment
Gold equities mirror copper’s 20% pullback, yet remain supported by spot prices near $4,000 per ounce against all-in sustaining costs below $2,000. UBS identifies Newmont, Endeavour, SSR Mining and Skeena among producers and Wheaton Precious Metals and Franco-Nevada among streamers as best positioned, while cautioning that the recent earnings upgrade cycle may reverse.
4. Aluminium Market Dynamics
Aluminium LME prices have risen roughly 10% since hostilities began, outperforming copper by about 15 percentage points, driven by damage to Middle East smelter capacity. Even if shipping routes normalize, ongoing supply disruptions at EGA and Alba facilities are expected to keep aluminium prices supported through the year.