How do commodity price expectations for 2027 compare with spot prices?

  • Using a simple average across the commodities it covers, Citi calculates that consensus prices are about 4% above spot overall, although the direction varies markedly by commodity.
  • Consensus prices for precious metals in 2027 are the furthest above spot: palladium, platinum and gold are higher by 28%, 25% and 16%, respectively. According to the report, spot gold is 4014 US dollars per ounce, while the 2027 consensus is 4650 US dollars.
  • Coal and some base metals show the reverse pattern: consensus prices for coking coal, thermal coal and zinc in 2027 are 15%, 14% and 5% below spot, respectively; copper is also about 3% lower.

Which miners could see earnings estimates change if spot prices persist?

  • Citi’s scenario assumes current spot prices remain unchanged in 2027. Because spot coal and zinc prices are above the 2027 prices used in consensus estimates, these producers could see earnings estimates revised upward if recalculated at spot prices, with copper producers benefiting to a lesser extent.
  • The price relationship is reversed for precious metals: current spot prices are below the 2027 consensus, so if current prices persist, earnings estimates for platinum group metals and gold miners could face downward pressure.
  • Under this scenario, Citi identifies companies including Glencore, Antofagasta and Thungela as having potential upside from recalculation at spot prices.

Why is Rio Tinto’s new bauxite capacity still unlikely to offset mine closures?

  • Rio Tinto approved the Kangwinan bauxite project in Queensland on 23 October, with total capital expenditure of 1.9 billion US dollars, including 150 million US dollars of early works approved in 2025. The project is expected to begin production in 2029 and reach full production in 2032, adding annual capacity of 20 million tonnes.
  • The new capacity will mainly replace an older mine. Citi estimates that about 14 million tonnes of the 20 million tonnes of annual capacity will replace the Andoom mine, which is nearing the end of its life this century, while the remaining approximately 6 million tonnes will provide net growth at Weipa. Weipa’s annual capacity will then be about 44 million tonnes, compared with current annual production of about 38 million tonnes.
  • Meanwhile, the Gove mine, with annual capacity of 12 million tonnes, will close in 2029. Assuming Sangaredi’s capacity remains unchanged, Citi expects Rio Tinto’s annual group bauxite capacity after 2032 to be 52 million–55 million tonnes, about 6 million tonnes below its 2026 production guidance of 58 million–61 million tonnes, and believes this will help support seaborne bauxite prices.
  • Rio Tinto classifies the project as replacement capital expenditure, and the related spending is already included in its medium-term capital expenditure guidance. Citi therefore maintains its capital expenditure and earnings forecasts and its neutral rating, with 12-month price targets of 155 Australian dollars and 67 pounds sterling for the Australian- and London-listed shares, respectively.