Investing.com -- J.P. Morgan in a note dated Monday has upgraded the mining and metals sector to “overweight,” reversing its previous “underweight” stance, as strategists point to improving fundamentals and a projected rebound in commodity prices.

The brokerage flagged a “V-shaped” recovery in late Q1 2025, fueled by expanding economic policy support in China and an anticipated rise in copper prices.

The move follows a prolonged period of underperformance for mining equities relative to both broader equity markets and industrial metal prices.

Since January 2023, the mining and metals sector has lagged the MSCI Europe Index by approximately 50% in U.S. dollar terms, according to J.P. Morgan strategists.

Since early 2024, mining stocks have lagged industrial metal prices by about 20%, indicating a gap strategists predict will close with improved market sentiment.

“Investors are increasingly aware in Q1’25 that M&M equities are lagging underlying commodity prices, which is unusual,” J.P. Morgan strategists noted, adding that the sector’s underperformance has largely been due to capital remaining on the sidelines amid policy uncertainty and historically low investor positioning in mining stocks.

However, they argue that this presents a strong upside opportunity should sentiment shift more positively.

A key driver of the expected recovery is China’s expanding economic stimulus measures, which have already started to take effect.

“China pivoted to a looser economic policy in Sept’24 and announced new fiscal stimulus actions in Mar’25,” J.P. Morgan strategists wrote.

With inventories running low and the supply-demand balance tightening, J.P. Morgan’s commodities research team forecasts a 15% increase in copper prices to $11,500 per metric ton by Q2 2026.

J.P. Morgan’s revised outlook is particularly bullish on miners with strong exposure to copper, aluminum, and gold, as well as those viewed as strategically vulnerable.

The brokerage’s key stock recommendations within Europe include Rio Tinto (NYSE: RIO ), Antofagasta (LON: ANTO ), Norsk Hydro (OTC: NHYDY ), Fresnillo (LON: FRES ), and SSAB, with strategists emphasizing that these companies are well-positioned to benefit from the sector’s anticipated re-rating.

“We specifically recommend adding exposure to Miners with exposure to copper, aluminium, gold, and/or corporates that are strategically vulnerable,” the note stated.

Beyond commodity price dynamics, J.P. Morgan sees a 10-20% upgrade in EBITDA estimates for mining companies at current market prices, with gold producers such as Fresnillo, AngloGold, and Hochschild expected to post the largest gains.

Despite lingering concerns over trade policy uncertainty—particularly potential new U.S. import tariffs on steel, aluminum, and copper—J.P. Morgan strategists believe that clarity on these policies, expected by early April, could act as a catalyst for renewed investor interest in the sector.