UBS makes positive revisions to base metals forecasts

Investing.com -- UBS has hiked its base metals forecasts, citing an improving macro backdrop, tighter physical markets, and resilient demand across key commodities.

The bank said it has made “positive revisions to base metals forecasts, with a preference for copper & aluminium,” while trimming nickel estimates and maintaining a cautious stance on zinc.

Analysts led by Daniel Major argue that the period of “maximum uncertainty/instability created by tariffs [is] behind us,” with macro supports such as U.S. rate cuts, dollar weakness, confidence in the AI trade, and potential China stimulus underpinning demand.

Industrial metals are also benefiting from physical market tightness and expectations that restocking will pick up when autos, construction and manufacturing strengthen.

For copper, UBS lifted its 2025 and 2026 price forecasts by about 3%, now expecting $4.37/lb in 2025 and $4.80/lb in 2026. The analysts see fundamentals strengthening into 2026–27, driven by limited mine supply growth, pressure on refined output and secular drivers such as electrification and technology demand.

"We expect fundamentals to be supportive in 2026/27 with deficits to drive up prices as (1) mine supply growth is limited, (2) refined output will come under pressure, (3) secular growth drivers remain strong, (4) traditional demand drivers will recover," the note states. 

Aluminium forecasts were also revised higher, up roughly 5% for 2025–26, with UBS pointing to constrained supply as a key support. China’s capped output and limited upside elsewhere could tighten the market further if demand rebounds.

The bank favors Norsk Hydro over Alcoa and South32, noting potential tariff exemptions on Canadian aluminium as a swing factor.

By contrast, nickel forecasts were cut by around 5% for 2026–27, reflecting oversupply risks. UBS now expects $7.25/lb in 2026 and $7.50/lb in 2027, down from previous estimates of $7.50/lb and $8.00/lb, respectively.

Zinc forecasts were nudged up about 5% for 2025–26, though the bank cautioned that rising supply could ease tightness over the medium term.

Iron ore forecasts were raised 5% for 2025–26, with prices expected to remain near $100/t over the next 6–9 months before falling back toward $85–90/t in 2027 as new supply pushes the market into surplus.

UBS said coal markets remain challenged, with downside risks for both metallurgical and thermal coal amid high Chinese production and recovering global supply.

Still, the bank expects thermal coal prices to trend higher over the next 12 months as fundamentals tighten, even though the medium-term outlook remains pressured by rising LNG supply.

The revisions fed into earnings upgrades across the mining sector, with UBS estimating 5–15% EBITDA lifts and 5–20% EPS upgrades, reflecting both higher commodity forecasts and mark-to-market FX adjustments. 

Alongside commodity forecasts, the bank raised price targets for several miners, reiterating a preference for Anglo American and Teck in copper, Antofagasta as a leading pure play, and Glencore for diversified exposure, while staying neutral on the iron ore majors.

UBS also lifted precious metals forecasts, noting that gold and related equities have materially outperformed in 2025. While the bank remains constructive, it said the risk/reward is now less attractive after the strong rally.