A market return of 9% to 10% in 2026 would be a good result by almost any standard. But good market returns don't stop investors from asking a familiar question: where could the upside come from on top of that?
For me, BHP Group Ltd (ASX: BHP) shares stand out as one of the few ASX heavyweights that could realistically do more than just keep pace. And the reasons have less to do with iron ore and more to do with copper.
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A different cycle is doing the heavy lifting
When investors think about BHP, iron ore is usually at the forefront of their minds. It remains enormously important, but the most powerful driver of potential outperformance heading into 2026 is copper.
Copper prices have moved to record highs, reflecting a structural mismatch between demand and supply. Electrification, renewable energy, electric vehicles, data centres, and artificial intelligence are all highly copper-intensive. At the same time, new copper supply is expensive, slow to develop, and increasingly constrained.
This is not a short-term commodity spike. I think it's a multi-year theme, and BHP is increasingly leveraged to it.
BHP owns some of the world's most significant copper assets, including Escondida in Chile and a growing copper province in South Australia. Operationally, copper volumes have been trending higher, supported by improved throughput and ongoing investment.
More importantly, management has been explicit about copper's role in BHP's future. The company is actively prioritising capital toward copper growth options across existing assets and future developments. It has also been looking at acquisitions to increase exposure.
That gives BHP leverage not just to today's prices, but to where copper prices could settle over the next decade.
If copper prices remain elevated, that upside flows directly into cash generation.
Iron ore provides the ballast
While copper offers upside, iron ore provides stability. Even if iron ore prices moderate from recent levels, BHP's assets sit at the low end of the global cost curve. That means strong margins can persist even in less favourable pricing environments.
The result is dependable cash flow that supports dividends, balance sheet strength, and reinvestment, all of which reduce downside risk, in my opinion.
This balance matters. BHP doesn't need perfect commodity conditions to perform well. It needs reasonable conditions across multiple commodities, with at least one area delivering upside. Heading into 2026, copper looks well-positioned to be that engine.
Capital discipline
One of the key reasons I'm comfortable backing BHP shares in 2026 is its capital discipline.
After years of learning hard lessons, the company has become far more selective with growth spending. Capital is increasingly directed toward assets with long lives, strong returns, and strategic relevance, such as copper and potash, rather than chasing volume for its own sake.
The Jansen potash project, due to come online later this decade, is a good example. While it won't drive 2026 earnings, it adds long-term diversification and optionality without compromising near-term financial strength.
This disciplined approach increases the likelihood that higher commodity prices actually translate into shareholder returns, rather than being diluted by poor capital allocation.
What could still hold BHP shares back
Of course, BHP isn't risk-free. A sharp slowdown in global growth, particularly in China, would weigh on commodity demand.
Furthermore, commodity prices are inherently cyclical, and sentiment can turn quickly. And as the world's largest miner, BHP won't deliver explosive upside in a straight line. But I think those risks are well understood, and arguably well priced.
Foolish Takeaway
With copper prices at record highs, long-term supply constraints in place, improving copper exposure, and iron ore providing a strong cash-flow foundation, BHP enters 2026 with a favourable mix of upside potential and downside protection.
I wouldn't expect BHP to rocket. But in a year of solid market returns, it has a credible path to doing better than the index and rewarding patient investors along the way.
