Rallying Miners Have Become Portfolio Must-Haves

Authored by Michael Msika via Bloomberg,

The metal demands of the energy transition and tight supplies have turned mining stocks into a “must-hold” for investors.

The basic resources index is by far the best performing group in the Stoxx Europe 600 since July, up 25%. It’s a turnaround from the weakness shown in the first half, when this column hinted that the sector may be close to a tipping point. China’s economic stimulus and M&A activity have helped the revival, but the anticipated scarcity of metals crucial for cleaner energy is the key driver.

Barclays strategists led by Emmanuel Cau upgraded mining stocks to overweight in their 2026 outlook, citing strong metal price momentum and a positive earnings outlook. Undemanding valuations, relatively modest ownership among investors, the broader reflation trade and expectations of Federal Reserve easing burnish the sector’s appeal, they add.

Miners are part of the short-cycle cohort, which is typically sensitive to fluctuations in manufacturing PMI readings. Anglo American, Boliden, Glencore, KGHM and Voestalpine are all part of a Barclays basket geared to economic news. “Industrial metals momentum remains strong implying further EPS upgrades,” the strategists say. “Sector offers optionality to China supply-side stimulus and short-cycle pick up.”

At the same time, demand for metals key to the energy transition — such as aluminum and copper — is becoming structural, making these commodities less correlated to the economic cycle than they used to be.

That has the knock-on effect of making the mining sector less cyclical too. That’s why short-term dips spurred by weak data readings have been bought fairly quickly. Aluminum is near a three-year high, while copper is close to record levels.

“Decarbonisation and electrification are creating durable demand for these metals,” says UniCredit economist Thomas Strobel.

“Copper is critical for power grids, renewable energy and EVs, while aluminum supports lightweighting and transmission infrastructure. These trends are increasingly shaping medium-term pricing and persist even during periods of weak industrial activity.”

Investors have switched gears in response. According to the Bank of America fund manager survey published this month, European investors are now net 4% overweight the sector, the first positive reading since June. They also see mining stocks as undervalued. There is merit in that idea, as while basic resources stocks trade near their average forward P/E relative to the broader market, they offer a 35% discount when assessed on price to book.

Meanwhile, increasing M&A interest in companies extracting the most sought-after metals like copper and renewed deal activity in gold signal strengthening confidence and that there’s further consolidation ahead, according to Morgan Stanley analysts led by Alain Gabriel.

“Tight supply and resilient demand create a supportive setup for mining equities into 2026,” the Morgan Stanley analysts say.

“Copper deficits are widening on disruptions, iron ore is supported by seasonal restocking, and aluminum faces emerging supply constraints — together underpinning over 10% 2026 Ebitda upgrade potential, especially for copper and gold producers.”

Miners have the support of strong fundamentals and an increasingly favorable macro-economic backdrop.

Even an assessment on the technicals looks promising, according to DayByDay analyst Valerie Gasltady.

“The basic resources sector has accelerated to the upside following the reintegration of its former major support at 641. It is currently holding above a short-term support at 567, which keeps the near-term outlook constructive and allows for further upside potential in the weeks ahead,” she says.