Analysts: Base Metals are in New, Strong Price Cycle
Research Report

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A strong base metals price cycle has begun, driven by new, structural sources of demand globally, according to Canaccord Genuity (CG) analysts in a research note dated October 17, 2025. To reflect this outlook, they updated their price estimates for copper and iron ore as well as their ratings and price targets on the companies in its coverage universe.

CG provided these five current sources of demand for base metals, which are growing rapidly:

1) Developing domestic supply chains and building relevant infrastructure. It has become a priority for governments around the world to secure supplies of raw materials. The U.S., for example, is committing significant funds to investing directly and indirectly into a domestic supply chain.

"Given the U.S. move to an 'America First' policy, we believe nations around the world are going to look to reduce their external dependence economically and militarily, resulting in a regional government and business investment cycle that will more than offset lower consumer spending," the CG analysts wrote.

2) Securing supplies of commodities for economic and military applications.

3) Key nations or blocs building strategic stockpiles of materials.

4) Rearming. This is particularly evident in the Western world as U.S. President Donald Trump pushes North Atlantic Treaty Organization members to increase military spending.

5) Pushing to accelerate artificial intelligence (AI) development and adoption. Given the AI race happening in the U.S. and globally, CG analysts believe data center infrastructure demand is going to continue and possibly go to a higher level.

Other positive tailwinds for base metals include the move away from the U.S. dollar, which seems to be escalating, particularly in commodity transactions. For example, last month, BHP Billiton Ltd. (BHP:NYSE; BHPLF:OTCPK), the world's largest mining company, agreed to settle about 30% of its spot iron ore sales to China in Chinese yuan (RMB).

"We continue to believe that 2025 marks the final nails in the coffin of globalization, with the world splintering into at least two economic blocs (likely three)," the analysts wrote.

Another factor is the ongoing tensions and posturing between the world's two largest economies, the U.S. and China, between which no trade deal has been reached. The analysts noted that the Chinese economy is struggling in several areas, and there have not been any signs of economic strengthening. Thus, they believe a stimulus deployment in 2026 is likely, and this would impact commodity prices positively.

The analysts' macro outlook for Q4/25 is positive. They note resilient growth in the global economy and not much slowing in the U.S., except for in employment. The Organization for Economic Co-operation and Development recently raised its global gross domestic product growth estimate for this year to 3.2% but left next year's forecast of 2.9% alone. Growth could pick up in H2/26, they purported, once the more than 100 rate cuts this year filter through the global economy.

"For now, we do not think business-cycle concerns should be the primary driver of investors' asset mix and sector strategies," the analysts wrote.

Bullish on Copper

The CG analysts presented their thoughts on copper. The copper price is rising again due to tightening supply conditions resulting from the force majeure at the Grasberg mine in Indonesia. At the same time, leading indicators of demand, such as manufacturing activity and global reflation, are acting as tailwinds. U.S. and Chinese physical demand for copper improved materially in Q3/25.

Against this backdrop, copper supply continues to be constrained after operational problems at several major mines (Kamoa-Kakula, El Teniente, Grasberg, Mantoverde, Constancia and Las Bambas) over the last six months and guidance downgrades for some mines, including QB2 and Tucuma. The CG analysts now expect to see exchange inventories start to deplete significantly through H1/26, thereby pressuring the copper price to rise.

For the rest of 2025 and into 2026, the analysts predict a period of increasing supply tightness as the impacts of major mine disruptions work their way downstream into an already tight concentrate market. They anticipate a transition to a refined metal shortage in H1/26 as scrap supply levels off and Chinese demand keeps growing. The analysts also wrote that they believe the global trade has figured out how to avoid the Trump tariffs, and as such, trade deals or offsetting stimulus measures will be infrastructure-heavy, military-focused, or both.

"Over the medium and long term, we believe the bifurcation and polarization of the global economy, coupled with copper's role as a strategic metal in electrification and strong new demand pulses from onshoring, strategic stockpiling, and rearmament, will result in significant incremental demand over the rest of the decade," wrote the analysts.

London Metals Exchange (LME) copper prices would need to move higher than CG analysts' target of US$5 per pound (US$5/lb) for gold to sustain a price above US$4,000 per ounce. Given gold's price above 800x LME copper prices, a historical barrier, and its seasonality typically starting in October, the metal could experience some volatility this quarter despite its steady climb.

Neutral on Iron Ore

Worldwide, year-to-date steel production continues to decrease, yet global steel stocks remain elevated due to weaker construction activity and ongoing economic uncertainty. Despite weakness in the global steel market and despite strong supply, IODEX, or Platts Iron Ore Index, pricing remains rangebound around its long-term average of about US$100 per ton (US$100/ton). The 65% premium has rebounded sharply from historic lows, but spot sales are still seeing a discount to the benchmark.

For the rest of 2025 and into 2026, CG analysts are neutral on the steel complex, they wrote, expecting prices to remain around current levels. They expect global steel production to decline again this year for the same reasons it did in 2024: weak Chinese demand, a slowdown in infrastructure projects in the rest of the world, anti-dumping measures, and regulatory attempts to rationalize Chinese steel production capacity.

Risks to iron ore pricing include the new U.S. tariffs, the ongoing trade war's disruptions to the global economy, and the tonnage the large Simandou project in Guinea will add to supply throughout 2025 and 2026, already now in a surplus.

On the other hand, how the Chinese government responds to the latest U.S. tariff barrage will determine, in large part, what happens to the copper price going forward.

"Longer term," wrote the analysts, "we believe the high-grade premium will move upward as the market demands higher iron ore content to offset coking coal usage as the steel industry continues to move toward 'greening' itself."

Revised Price Estimates

In their report, the CG analysts revised their price decks for copper and iron ore. For copper, they increased their estimates for Q4/25e, Q2025e and Q2026e slightly. For Q4/25e, they now forecast US$4.85/lb, up from US$4.75/lb previously. For 2025e, their forecast is US$4.46/lb, previously US$4.44. For 2026e, their estimate is US$5.19/lb, up from US$5/lb before.

CG did not change its price forecasts for 2027e and beyond. Its long-term copper price is still US$4.50/lb.

As for iron ore, CG's estimate for 2025e remains the same at US$102/ton. For 2026 through 2029, CG reduced its price by US$10, so now it is US$90/ton, US$100/ton before. The bank's 2030e and long-term price now are US$85/ton, reflecting a US$5/ton decrease.

Changed Equity Positioning

The CG analysts wrote that they are shifting toward a more aggressive investment posturing, away from its dominant defensive posturing in Q2/25. They prefer copper versus the ferrous  complex even though zinc prices have been strong due to supply-demand factors.

The analysts prefer companies that have leverage to copper prices, show production growth in 2026 and 2027 and have potentially meaningful positive catalysts ahead. They are less focused on names with low operational and financial risks and more focused on copper developers. They like companies with attractive jurisdictions, a clear and defined path to production (permits, technical studies, social licenses, etc.) and the economics and scale that would attract larger companies.

Names to Consider

The CG analysts highlighted many of the companies in their coverage universe. Among the developers, they wrote, Solaris Resources Inc. (SLS:TSX) is most likely to be acquired in the next 12 months. Arizona Sonoran Copper Co. (ASCU:TSX; ASCUF:OTC) is most likely to rerate given the quality of the asset, the strategic investment by HudBay Minerals Inc., improved trading liquidity, and the upcoming prefeasibility study on the Cactus project. Blue Moon Metals Inc. (MOON:TSX.V; BMOOF:OTCQB; 8SX0:FRA) is notable for its portfolio of fully financed, brownfield projects in good jurisdictions, its strategic optionality in the U.S., and its attractive valuation. Capstone Copper Corp. (CS:TSX) has medium-term production and cash flow growth, a solid balance sheet, commodity price leverage, and an attractive valuation. HudBay Minerals Inc. (HBM:TSX; HBM:NYSE) has a medium-term growth profile, an attractive valuation, and mixed copper-gold exposure. They also touched on Western Copper and Gold Corp. (WRN:TSX; WRN:NYSE.MKT), for which CG gave a Speculative Buy rating and CA$6.50 target price.

Two developers, the analysts downgraded are Ero Copper Corp. (ERO:NYSE) and First Quantum Minerals Ltd. (FM:TSX; FQM:LSE). While Ero shows near-term growth potential, the analysts see risks to 2025 production, questions around medium-term production, and a relatively elevated valuation on a net asset value basis. Therefore, they downgraded it to Hold from Buy because of ongoing operational challenges, the elevated NAV multiple, recent outperformance, and a limited implied return to their target. First Quantum offers solid near-term and medium-term growth if Cobre Panama is restarted, but this is not a given.

Among the larger caps, the analysts called out Lundin Mining Corp. (LUN:TSX; LUNMF:OTCMKTS) for its solid operations, strong balance sheet, longer-term growth via Vicuna, and lack of near-term capex commitments. They downgraded NGEx Minerals Ltd. (NGEX:TSX.V) to Hold from Speculative Buy based on its valuation.