H1 2026 Mining Analysis: Cost Inflation, Geopolitical Risk, and Commodity Divergence

What were the main drivers of change for the mining industry in H1 2026?

The primary drivers for the mining industry in the first half of 2026 were significant cost inflation and supply chain disruptions resulting from the conflict in the Strait of Hormuz, a widening performance gap between commodities, and a continued strategic focus on securing copper production capacity. Geopolitical shocks established a higher cost base for the industry, while record margins for precious metals contrasted sharply with loss-making conditions for many lithium and nickel producers.

Why are geopolitical risks and supply chain resilience critical for mining now?

Geopolitical risks and supply chain resilience have become critical because disruptions in the Strait of Hormuz exposed the global mining industry's dependence on concentrated energy and reagent supply chains. This event triggered significant inflation in fuel, freight, and reagent costs, establishing a new, higher cost floor for mining operations and underscoring the necessity for operators to prioritize execution, discipline, and risk management.

Key Insights

• Geopolitical Shocks Drive Cost Inflation: Disruptions in the Strait of Hormuz caused copper mining costs to rise by 5.1% (10 cents/lb) and iron ore costs by 11.3%, primarily due to inflated reagent and shipping expenses.
• Commodity Markets Are Sharply Divided: Gold producers achieved record-high margins of approximately $2,800/oz, while 47% of lithium chemical production and 14% of nickel production operated at a loss in the first half of the year.
• Copper Remains the Strategic Focus: Copper drove a projected decade-high capital expenditure of $121.6 billion for 2026 among the top 30 miners, with major firms prioritizing investment in copper growth projects.
• Resource Nationalism Adds Execution Risk: Policy changes in Ghana and Peru introduced new cost pressures and regulatory uncertainty, highlighting the growing impact of resource nationalism on mining operations and investment.
• Simandou Project to Reshape Iron Ore Market: The ramp-up of the Simandou project in Guinea, with a target capacity of 120 million mt/y, is expected to exert deflationary pressure on the iron ore cost curve, challenging higher-cost producers.
• Feasibility Study Assumptions Diverge: Analysis shows copper developers are using aggressive price assumptions only 18% below market averages, while gold developers remain conservative with assumptions 39% below spot prices, creating different risk and reward profiles.

From Hormuz to cost curve: Mining's inflation reckoning in H1 2026

The first half of 2026 for the mining industry was defined by a sharp increase in mining costs, a widening split between commodity winners and losers, and a continued race for copper production capacity. The US-Israel war with Iran and the resulting shipping disruptions in the Strait of Hormuz became January-June's major geopolitical shock, disrupting the energy, reagent and shipping markets. At the same time, record margins for precious metals contrasted with severe pressure for that of lithium and nickel, while copper remained the industry's top strategic priority.

• Copper mining costs rose 5.1% in the first half of 2026, or by 10 cents per pound, due to the Strait of Hormuz disruptions.
• Gold margins came at a record high of about $2,800 per ounce, compared to 47% of lithium output loss-making in the first half.
• The world's top 30 miners aim to spend a record $121.6 billion in 2026 in capital expenditure.
• The Simandou project ramp-up will pressure high-cost iron ore producers to have more output.
• Feasibility price assumptions diverge across copper, gold and lithium.

A new cost floor since the Strait of Hormuz disruptions

The Strait of Hormuz disruptions exposed global mining's dependence on concentrated energy and reagent supply chains. Copper miners were among the first to feel the impact, with our 2026 scenario projecting global mining costs to increase 5.1% or more than 10 cents/lb, relative to the 2026 consensus forecast base case. Most of the increase came from reagent inflation, with reagent costs projected to rise 36% compared with the 2026 base case forecast, driven by higher sulfuric acid and sulfur prices.

The supply chain shock soon spread across other bulk and battery-linked commodities. Relative to the 2026 consensus forecast scenario, iron ore costs for our 2026 scenario were projected to increase 11.3% to $56.57 per dry metric ton, driven mainly by higher shipping and diesel costs. With a scenario assuming a 60% increase in fuel prices, manganese producers faced an average cash cost increase of $7.59/dmt, with South Africa especially exposed due to diesel use in haulage and backup power generation. In the Philippines, diesel prices rose 111% during the energy disruption due to the disturbed supply chain, triggering a national energy emergency and threatening global nickel ore shipments to Indonesia.

The broader lesson was clear: The mining industry's cost base has moved higher and at the same time, geopolitical disruptions affect fuel, freight, reagents and mine-site operations.

Resource nationalism adds to execution risk

Regulatory pressure also intensified in the first half of 2026. In Ghana, new mining rules now require surface operations to be conducted by fully Ghanaian-owned contractors, while underground operations must use contractors with at least 50% Ghanaian ownership. This approach achieves many of the economic goals of nationalization without formal expropriation. Ghana's average gold all-in sustaining cost (AISC) is already estimated at $1,728/oz in 2026, and transition costs could push that toward $1,800-1,900/oz.

Indonesia's revised nickel ore pricing system has created another cost squeeze. The new benchmark doubled the price of limonite ore, the key feedstock for high-pressure acid leaching (HPAL) plants, just as sulfuric acid costs were rising. This could further pressure HPAL margins and accelerate the market shift toward lithium-iron-phosphate (LFP) batteries, which use less nickel.

The world's third-largest copper producer, Peru emerged as one of the biggest copper risk stories of the first half, as it faced heightened political and regulatory uncertainty. The country's $64.1 billion mining investment pipeline — 72% of which involves copper — was overshadowed by the June 7 presidential runoff between Keiko Fujimori and Roberto Sánchez. During the election campaign, Sánchez's proposals to review mining agreements, introduce new taxes, rewrite the constitution and phase out open-pit mining posed the largest near-term policy risk. But Fujimori won the election, easing concerns over sweeping policy changes. Still, uncertainty remains over a congressional concession reform bill that could weaken mining contract protections and shorten exploration windows. At the same time, around $7 billion in copper projects remain stalled by illegal informal mining under the Registro Integral de Formalización Minera (REINFO - comprehensive mining formalization) registry, underscoring Peru's greatest challenge to be institutional capacity rather than geology.

Copper drives consolidation and capital spending

Copper remained the industry's strategic center of gravity in the first half. The proposed $260 billion Rio Tinto Group-Glencore PLC merger highlighted the value of copper production capacity. Had the deal proceeded, the combined company would have become the world's largest mined copper producer at roughly 1.7 million metric tons per year, although the companies later abandoned the deal after failing to reach an agreement.

Even without megamergers, copper is driving capital allocation. The world's top 30 miners are expected to spend a decade-high of $121.6 billion in 2026. BHP Group Ltd. and Rio Tinto Group are projected to invest around $11 billion each, while Glencore PLC and Freeport-McMoRan Inc. remain heavily focused on copper growth. However, as major projects such as Oyu Tolgoi in Mongolia and Woodsmith in the UK wind down, capital expenditure is expected to decline in 2027, raising concerns about meeting future copper demand with the current level of investment.

A sharply divided commodity market

Mining costs from January to June showed a deeply bifurcated industry, as gold and silver producers enjoyed exceptional profitability, while lithium and nickel remained under pressure.

The average global gold AISC is estimated at $1,539/oz in 2026, while prices remain far higher, creating record margins of roughly $2,800/oz. Silver producers are also benefiting from strong prices, with primary silver AISC margins expected to reach about 52%.

Battery metals are in a much weaker position. Around 47% of lithium chemical production was operating at a loss in the first half of the year. Many unconventional lithium projects require prices of $30,000-40,000/mt — well above current levels — to justify rapid payback.

Lithium prices have recovered significantly from their early-2026 five-year low, but they remain below the levels needed to broadly incentivize new supply. An analysis of 54 technical studies indicates that most projects require prices of about $20,000-40,000/mt to achieve a five-year payback, depending on the extraction method. The price recovery has prompted operators to evaluate restarting idled hard-rock mines and suspended lithium processing projects. However, recent mine closures, project failures and cost overruns underscore the financial and operational challenges facing the sector. As a result, investment in new lithium supply remains cautious, despite improving market conditions.

Nickel is also squeezed, with around 14% of production operating at a loss and several high-cost assets still shuttered.

Copper sits between these extremes; prices are strong, but costs are rising due to lower grades, higher stripping ratios and persistent inflation. The market is profitable, but the underlying cost curve is proving more challenging.

Simandou reshapes iron ore

The start of shipments from the Simandou project in Guinea marks a major shift for iron ore. The project targets 120 million mt/y capacity and has already begun sending cargoes to major Chinese ports. On an FOB basis, Simandou is highly competitive, with cash costs of about $27-28/dmt. However, higher shipping costs to China reduce its delivered-cost advantage versus supply from Australia.

Even so, Simandou is expected to pressure higher-cost producers, particularly Chinese domestic concentrate and Canadian concentrate operations. Its ramp-up should act as a deflationary force on the iron ore cost curve over the coming years.

Feasibility assumptions diverge

We released a three-part study series in June and July that examined how base-case commodity-price assumptions in mining feasibility studies compare with prevailing spot prices across copper, gold and lithium. The analysis highlights how project economics are changing alongside risks and how they are being shaped by the relationship between study assumptions and market prices which varies by commodity and market cycle.

Copper developers are using more aggressive price assumptions than in the past. In 2026, copper feasibility studies averaged $10,647/mt, only 18% below the year-to-date market average. If copper corrects toward $8,500-9,000/mt, projects approved using high base-case prices could face a margin squeeze and potential write-downs. Copper's traditional 30%-50% price buffer has collapsed to single digits, with 2023-24 study assumptions converging to within 5%-6% of spot. With the London Metal Exchange copper averaging approximately $12,970/mt year-to-date in 2026, studies now model five-figure prices, eroding the cyclical cushion that once absorbed downturns.

Gold developers remain far more conservative: Gold feasibility studies for 2026 used an average price of $2,946/oz, 39% below the year-to-date market average. That discipline creates a substantial upside if gold prices remain elevated. Gold demonstrates stronger through-the-cycle discipline: Assumptions ran 10%-27% below spot during the 2004-12 bull market. With gold averaging $4,817/oz in 2026, study assumptions of $2,946/oz sit 39% below spot — the largest single-year divergence in the dataset, representing substantial embedded upside.

Lithium presents the most extreme case: Assumptions swung 168 percentage points, to a 105% premium in 2025 from a 63% discount to spot in 2022 when study averages of $20,594/mt sat at more than double the spot price of $10,059/mt.

The three-part series underscores that assumption-to-spot divergence varies dramatically by commodity and cycle phase, with material implications for project valuation.

Metals & Mining H2 Outlook

The second half of 2026 will test the mining industry's ability to manage a more volatile and expensive operating environment. High prices would support copper, gold and silver but energy security, water access, community relations, regulatory stability and supply chain resilience are becoming crucial factors alongside resource quality.

The winners will be companies that can carefully allocate capital, effectively navigate geopolitical and operating risk and reliably execute projects. The industry is moving from a resource-led growth cycle to one defined by execution, resilience and discipline.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

How S&P Capital IQ Pro Supports Mining Industry Analysis

S&P Global Capital IQ Pro provides the data, scenario analysis, and insight necessary to navigate the complex challenges highlighted in this article. The platform's asset-level cost models and supply chain data allow clients to quantify the impact of geopolitical shocks, such as the Strait of Hormuz disruptions, on costs for specific commodities like copper and iron ore. By analyzing feasibility study assumptions against market prices, as detailed in our research, clients can better assess project viability and investment risk across the commodity spectrum, from copper to gold and lithium.

Answering Key Questions on H1 2026 Mining Trends

What was the specific impact of the Strait of Hormuz disruptions on mining costs?

The disruptions in the Strait of Hormuz led to significant cost inflation across the mining sector, exposing its dependence on concentrated supply chains. Global copper mining costs were projected to increase by 5.1% (over 10 cents/lb), driven by a 36% rise in reagent costs, while iron ore costs were projected to increase by 11.3% due to higher shipping and diesel expenses.

How did profitability differ across various commodities?

Profitability was deeply bifurcated, with precious metals performing exceptionally well while battery metals faced severe pressure. Gold producers enjoyed record margins of approximately $2,800/oz, and silver AISC margins were expected to reach 52%. In contrast, about 47% of lithium chemical production and 14% of nickel production were operating at a loss during the first half of 2026.

What is the significance of the Simandou iron ore project?

The Simandou project in Guinea is significant because it is expected to reshape the iron ore market by adding 120 million mt/y of capacity. While its delivered-cost advantage to China is reduced by shipping, its highly competitive free on board (FOB) cash costs of about $27-28/dmt will likely pressure higher-cost producers, particularly in China and Canada, acting as a deflationary force on the global iron ore cost curve.

Why is copper a top strategic priority for major miners?

Copper is a top priority due to its central role in driving capital allocation and consolidation strategies aimed at securing future production capacity. This focus is demonstrated by the industry's record projected capital expenditure of $121.6 billion in 2026, the strategic rationale behind the proposed (though abandoned) Rio Tinto-Glencore merger, and the heavy investment in copper growth by major miners like BHP and Freeport-McMoRan.