Copper Reigns Supreme at BHP Group and Rio Tinto
Rising copper prices and growing output are shifting BHP Group and Rio Tinto's profit mix, raising questions about long-term valuations. Copper is increasingly shaping the profitability of these companies, with its share of total revenue and operating profile on the rise.
Rio Tinto released its half-year results, showing a 43% increase in base profit, the highest in four years. Assets not related to iron ore, including copper, are outperforming iron ore. This marks an important milestone: Rio continues to be a global leader in iron ore production, ahead of Vale and BHP.
The growth of copper's role as the main driver of BHP and Rio's profit growth reflects increased production and rising copper prices. London copper futures peaked at $14,527.50 per tonne on January 29, while iron ore contracts in Singapore traded in a narrow range over the last two years.
The long-term approach to copper looks more optimistic compared to iron ore: copper is needed for the energy transformation and electrification that support new technologies, including artificial intelligence. World steel production may grow, but copper supply may be sufficient to meet demand, often with a larger share of secondary material used.