- Middle Eastern conflict has knocked the price of both copper and the Chilean miner
- Hopes for a speedy and peaceful settlement are helping sentiment toward both
- Resumption of global trade flows would ease worries over the miner’s energy costs and also supplies of other vital raw materials
- No change to full-year guidance but first-quarter costs much lower than expected
“‘Doctor Copper’ gets its nickname because the industrial metal’s many uses mean it can be a good guide to global economic health, so investors will be looking for a rapid rebound in both the commodity and in the share prices of its major producers as a sign that confidence is returning and the war in the Middle East is set for a speedy and peaceful resolution,” says AJ Bell investment director Russ Mould.
“Antofagasta’s first-quarter update offers reassurance, with production volumes on track and the net cost of production lower than expected for 2026 as a whole, as issues such as energy costs and the availability of raw materials are yet to have any impact.
Source: LSEG Refinitiv data
“Copper is malleable, conductive, and ductile, so it is used in everything from kettles to cars and plumbing and wiring to industrial machinery. As such it is a vital and widely used material, and one where Chile, Antofagasta’s home, provides nearly one quarter of the world’s needs.
“The metal’s price stumbled as the war in Iran broke out, amid fears that disruptions to global trade flows via the Strait of Hormuz, and perhaps even the Red Sea, would combine with higher oil and gas prices and all of their knock-on effects to dampen global growth. Shares in Antofagasta slid in sympathy.
“The price of the metal and the share price of the miner are both rallying, helped by hopes that the start of peace talks between Washington and Tehran means that some form of peaceful conclusion to the conflict is within reach, and also by Antofagasta’s update for the first three months of 2026.
“Higher energy prices, or issues such as the availability of sulphur for the production of sulphuric acid which is in turn used in some production techniques for copper, are yet to make a real mark on Antofagasta’s overall activities, although management does note the impact of acid and diesel prices, as well as a stronger Chilean peso, at some of its sites. Qatar is the world’s leading producer of sulphur and its ability to ship remains constrained owing to the Iranian chokehold on the Strait of Hormuz.
“However, the cash cost of copper production did jump by a sixth to $2.77 a pound, to show some early-stage effects, although this also reflected investments made in new equipment, pipelines, and water supply.
“Higher output of gold and unchanged levels of molybdenum production, as well as higher prices for both, helped overall net cash costs, and they fell by almost a third to $1.08 a pound – well below management’s guidance for the year of $1.15 to $1.35 a pound.
Source: Company accounts
“Antofagasta’s copper output fell 2% year-on-year in the first three months of the year, as expected, and the company still expects total production for 2026 to reach between 650,000 and 700,000 tonnes, up from 653,700 in 2025.
Source: Company accounts, mid-point of management guidance for 2026E
“The combination of output, costs and selling prices will largely determine how Antofagasta’s profits develop in 2026 and beyond. Analysts’ forecasts are lower now than they were before the start of the war, thanks to concerns over its direct and indirect effects on global trade and growth and copper’s price slip.
“The metal is price is now moving higher and that supports consensus forecasts for increased earnings both this year and next, based on Antofagasta’s preferred profit metric of earnings before interest, taxes, depreciation, and amortisation (EBITDA).
Source: Company accounts, Marketscreener, consensus analysts’ forecasts
“Antofagasta has also laid down the foundations for further output growth. Capital expenditure rose sharply to $3.7 billion in 2025 from $2.4 billion in 2024 thanks to construction work at the Centinela and Los Pelambres mines in Chile.
“That spending figure is the highest in at least two decades and capex as a percentage of sales has only ever exceeded 2025’s mark of 43% once in that time span.
Source: Company accounts, Marketscreener, consensus analysts’ forecasts, management guidance for capex in 2026E
“That was back in 2009, when copper prices rebounded sharply in the wake of the Great Financial Crisis, only to peak in 2011 amid an onrush of fresh capacity.
“The risk is that this output increase means growth in supply outpaces growth in demand, or the war leads to an economic slowdown that crimps copper consumption and leads to another downturn in metal prices. But, for the moment, consensus forecasts see a big jump in earnings across the next two years. Much may depend upon how quickly – or whether – global trade flows and growth return to their pre-war trajectory, if, as and when Washington, Jerusalem and Tehran reach a peaceful settlement that is satisfactory to all.
“Copper’s renewed advance may be one sign that investors feel the worst of the war is behind us, now that some form of talks are underway. Equally, it could be a sign that investors are looking at the potential for longer-term after-effects.
“Covid-19, Russia’s attack on Ukraine and the war in the Middle East have all highlighted the importance of not just efficient supply chains but secure ones, especially when it comes to vital raw materials. Inflation is also an issue once more. Both factors draw attention to commodities, given their importance to economic growth and also as a potential store of value, or haven asset.
Source: LSEG Refinitiv data
“It may therefore be no coincidence that the CRB Commodities index is breaking out to new all-time highs and finally surpassing the peak set in summer 2008.
“The CRB benchmark, which follows the prices of a basket of 19 commodities, can also point to a record of outperforming the FTSE All-World equities index since the start of this decade.”
Source: LSEG Refinitiv data
