Iron ore retreats, copper takes the lead: Australian mining stocks find a new growth story

According to Zhihu Finance APP, analysts state that power infrastructure and artificial intelligence (AI) have driven a sharp increase in copper demand, providing investors with a new rationale for investing in the mining sector, and suggesting that Australian mining stocks are likely to continue their upward trend.

Over the past year, the mining sector has been the best-performing segment of the S&P/ASX 200 Index and is now gradually moving away from its long-standing focus on iron ore as mining companies turn to copper in search of growth. BHP has benefited from copper prices hitting new highs, with revenue from its copper business accounting for more than half of its total annual revenue for the first time; meanwhile, Fortescue Ltd., which mainly focuses on iron ore, continues to see declining profits.

As AI data centers, electrification, and grid expansion drive copper demand, coupled with the real estate market slump suppressing iron ore demand, this sector's shift in focus is set to accelerate further. Leading Australian mining companies are increasingly investing in copper assets, moving away from single reliance on the traditional staple commodity of iron ore.

"The core point is that copper demand is growing while iron ore is not, and the market is pricing this in," said David Tuckwell, Chief Investment Officer at Sydney ETF Shares. From the latest financial reports of top Australian mining companies, "the transition to copper businesses has truly taken root."

BHP is not the only company seeking to expand its share of the global copper market; peers such as Rio Tinto are also implementing similar strategies as they aim to capitalize on tight supply, AI-related demand surges, and trade tariffs pushing copper prices higher. BHP's push to increase its copper exposure is part of the reason it attempted to acquire Anglo American Plc, though that bid ultimately fell through last year.

The divergence between copper and iron ore markets is becoming increasingly pronounced. As the major Asian real estate markets struggle to recover from post-pandemic doldrums, iron ore prices have remained relatively flat.

However, some analysts believe that in the Australian market, investors seeking pure copper mining opportunities have limited options.

"If you're looking for large-scale, high-quality copper assets, the ASX is not the first choice," said Dylan Kelly, Head of Research at Terra Capital Holdings. For "large copper producers with lengthy mining cycles, ultra-low costs, and a wide slate of assets, you need to look to Canada," he noted, adding that his firm holds a minor position in Perth-based FireFly Metals Ltd.

Even so, increasing copper mining assets still offers investors a new pathway to participate in the current AI-driven bull market — a surge that is pushing global equity markets to new heights and providing further upside for Australian mining companies. As data center and grid infrastructure investment accelerate, copper demand is expected to remain strong, while proposed US tariff policies and declining copper output in Chile are further tightening supply.

"There is now a structural supply gap emerging in the copper industry as a whole," said Jessica Leung, portfolio manager at Global X Management. Together with AI-driven demand for the metal, the Australian mining sector is now pivoting to "what they see as the next stage of growth."