Copper will enter a supply-driven deficit in 2026, pushing prices higher amid tightening in both concentrate and scrap markets, UBS expects.
Aluminium and lithium are also expected to outperform due to supply constraints, energy transition and AI/ defence exposure, while the Swiss bank remained supportive of gold, but sees more upside in certain industrial metals after the precious metals gains in 2025.
Despite the bullish tone for selected industrial metals, UBS said it does not expect a broad-based rebound across commodities, citing continued weakness in traditional demand from construction, autos and manufacturing in developed markets.
While China’s growth is expected to remain resilient, its property downturn and slowing exports are likely to cap commodity demand.
Copper, lithium and aluminium
The bank said it sees “acute tightness” in copper ahead, with mine supply growth limited for a second year.
“While speculative positioning drove the rally in the second half of 2025, we now have visibility that refined output will slow materially,” the note said, adding that this should trigger inventory drawdowns and further sustainable upside in copper prices.
Top copper equity picks include Freeport-McMoRan Inc (NYSE:FCX), Anglo American PLC (LSE:AAL), Teck Resources (TSX:TCK) and Capstone Mining Corp (TSX:CS).
UBS also turned incrementally more bullish on lithium, citing a sharp upgrade to demand forecasts through 2030, driven by stronger-than-expected energy storage (BESS) demand. Albemarle Corporation (NYSE:ALB, XETRA:AMC), Liontown Resources (ASX:LTR) and Mineral Resources Ltd (ASX:MIN) were named as preferred stocks.
Aluminium is also expected to benefit from firm demand and constrained supply, with the bank highlighting capacity caps in China, smelter closures in Mozambique, and output disruptions in Iceland.
Gold, platinum and iron ore
UBS was also constructive on gold miners heading into 2026, even as valuations have rebounded and investor positioning has grown more crowded.
"Valuations anbd the risk vs reward for gold equities are not as compelling as they were at the start of 2025 and we are cognizant that no bull market lasts forever; but in our view it is too early to call the top of the cycle for gold miners.
"Spot valuations are generally undemanding, operational performance/reliability appears to be improving, the gold miners are delivering record FCF and most large cap miners are demonstrating capital discipline (lifting cash returns & remaining selective on capex/M&A).
"If the gold miners can continue to rebuild investor confidence/trust, we see potential for multiple expansion (vs spot) for selected stocks."
The Swiss bank expects potential multiple expansion for selected names if miners continue rebuilding investor trust. Top picks include Barrick Gold Corp. (TSX:ABX, NYSE:GOLD), Newmont Corporation (NYSE:NEM, TSX:NGT, ASX:NEM), AngloGold Ashanti (ASX:AGG, NYSE:AU), and Endeavour Mining PLC (LSE:EDV, TSX:EDV, OTCQX:EDVMF).
In platinum group metals (PGMs), price gains in 2025 were largely driven by sentiment, not demand. UBS expects further upside will depend on a “volume-led recovery” in end-use sectors. Its preferred name is Valterra Platinum Ltd (LSE:VALT, JSE:VAL).
Oversupply is seen continuing in the nickel market and weakening battery demand trends, though prices may find support from potential supply cuts in Indonesia, while iron ore equities are seen as less compelling, with the market shifting into surplus by 2027 as Rio Tinto Ltd's (LSE:RIO, ASX:RIO, OTC:RTNTF) Simandou ramps up, with prices trending toward $90/t.
The most preferred iron-focused names – Rio Tinto, BHP Group Ltd (LSE:BHP, ASX:BHP) and Fortescue – are rated 'neutral' by UBS.