Rio Tinto (Rio Tinto (RIO)) just posted its best first-half earnings in four years, showing why copper has become mining’s hottest profit engine. However, the results mask a troubling reality – the system needed to produce the metal is becoming increasingly fragile.
The miner reported underlying earnings of $6.85 billion for the six months through June, a 43% increase from a year earlier. Its copper division’s EBITDA surged 84% to $5.7 billion, while copper and aluminum together supplied about 56% of group profit — overtaking iron ore’s historic dominance.
Rio Tinto is up 14.51% year-to-date; the stock has strongly outperformed the Global X Copper Miners ETF (COPX), which is up 6.59% in the same period.
According to Reuters, CEO Simon Trott called it a "step-change in performance," citing higher commodity prices, increased copper output, and productivity gains. He also flagged "growing data center and grid storage battery demand" for copper and lithium.
That demand is delivering an immediate windfall. But the industry’s longer-term supply response rests on aging mines, concentrated processing capacity and increasingly unrealistic production plans.
The Smelting Chokepoint
The International Energy Agency’s Global Critical Minerals Outlook 2026, released earlier this month, offered a temporary relief. The organization now sees narrowing its projected 2035 copper supply gap to 25% from about 30% a year earlier. Yet the improvement is less reassuring than it appears.
Most of the added supply doesn’t come from major new discoveries but from extensions and expansions of existing operations, including Kisanfu and Lumwana in Africa, Highland Valley in Canada and Antamina in Peru. The strategy resembles drawing down savings rather than creating new income. It can buy time, but it cannot indefinitely replace a depleted pipeline of fresh projects.
Even the metal that mines do produce faces a narrowing route to the market. China has built more than 90% of new capacity over the last 20 years and now controls roughly half of the smelting market.
That expansion has overwhelmed available concentrate supply. Benchmark treatment and refining charges (the fees smelters charge for processing) fell to zero in early 2026, while spot charges have been negative since 2024.
Smelters outside China are operating at below 70% capacity, compared with about 85% in China, and many depend on sales of gold, silver, and sulfuric acid byproducts to remain viable.
With no margin in copper processing, maintenance becomes an economic decision. Operators can pull repairs forward, shut furnaces and wait out the market. Zambia has already felt the consequences, suspending export duties on more than 270,000 tons of copper concentrate after domestic smelters went offline for extended maintenance.
Codelco’s Reset and Citi’s Bullish Call
For Western economies trying to secure metals for power grids, electric vehicles and data infrastructure, reliance on aging mines and Chinese processing exposes an uncomfortable vulnerability.
Yet, amid Chile’s struggle to meet output targets, the pressure to speed up domestic projects (such as BHP Group Limited (BHP)/Rio Tinto (RIO)-owned Resolution Copper) is mounting.
Chilean state-owned Codelco has ruled out the longstanding objective of reaching 1.7 million tons of annual output within four or five years. According to Bloomberg, Chairman Bernardo Fontaine expects 2026 production of 1.331 million to 1.357 million tons and is shifting toward profitability over volume.
"For seven years, Codelco hasn’t met its projections — and this year is no exception," Fontaine said. Burdened by more than $20 billion in debt, operational delays and costly modernization projects, the world’s largest copper producer is reviewing spending and seeking more private-sector partnerships.
Citi sees the pressures translating directly into prices. The bank retained a $14,500-per-ton target for the next zero to three months and a $15,000 year-end forecast, versus London Metal Exchange copper near $13,770 per ton.
"While demand growth remains tepid, supply is under much greater pressure," Citi wrote, according to Reuters.
Record profits write the market headlines today. However, the question arises whether the industry can build a supply resilient enough before its safety buffer runs out.
