Copper, and therefore copper stocks, are a hot item of interest.
Moreover, with climate protocols and greater global sensitivity to the use of hydrocarbons, if we do see a reduction in demand for oil and gas due to net zero goals, this will necessitate greater production of industrial metals, such as copper, aluminum, and nickel, to name a few.
This will be bullish for the demand for these metals and will incentivize greater production of them.
Who benefits from this most is a stock picker’s game. Some will not try to pick winners and losers and will instead focus on a basket of copper stocks.
In this article, we will take a look at what copper stocks are, some of the largest producers, and how you can trade them.
What are Copper Stocks?
Copper stocks are shares of companies that mine or produce copper. These companies tend to be large-cap mining companies with extensive operations around the world.
The largest copper miners are BHP Billiton (BHP), Rio Tinto (RIO), Freeport-McMoRan (FCX), and Glencore (GLEN or GLNCY).
All four of these companies have operations in many countries beyond just copper mining, including iron ore, coal, aluminum, and other metals.
These companies tend to be diversified miners with large-scale operations. As such, they are not as directly impacted by changes in the price of copper as smaller so-called pure-play miners would be.
What Moves Copper Prices?
Copper prices are driven by a variety of factors, including:
Supply and demand dynamics
Changes in the supply or demand for copper can have a big impact on prices.
For example, if there is an increase in global demand for copper due to new infrastructure projects being built, this will likely lead to higher prices.
On the other hand, if there is a sudden increase in supply due to a new major mine coming online or due to a decrease in demand, this could lead to lower prices.
Inflation can also impact copper prices. If inflation is on the rise, this tends to lead to higher commodity prices as investors seek out assets that will hold their value in an inflationary environment.
On the other hand, if inflation is low or falling, this may lead to lower commodity prices as investors shift their money into assets that offer better returns.
Changes in currency values can also impact copper prices. For example, if the US dollar strengthens relative to other currencies, this may make copper more expensive for buyers using other currencies if the copper is denominated in USD (as a lot is).
On the other hand, if the US dollar weakens, this may make copper cheaper for buyers using other currencies.
Finally, geopolitical factors can also impact copper prices.
For example, if there is increased political instability in a major copper-producing country, this could lead to higher prices due to concerns about potential supply disruptions.
On the other hand, if a new major copper mine is developed in a politically stable country, this could lead to lower prices due to the increase in supply.
If hydrocarbons have restrictions, this will create more demand for industrial metals like copper.
Electric vehicles also use around 4x the amount of copper a regular vehicle does. So, if we see a rise in electric vehicles, this will lead to an increase in demand for copper.
How to Trade Copper Stocks
There are a few different ways to trade copper stocks.
The first is to buy shares of a company that mines or produces copper. This can be done through a traditional brokerage account.
If you want to trade copper without taking on the risk of owning an individual stock, you can also trade ETFs that track the price of copper or a basket of copper stocks. One popular option is the Global X Copper Miners ETF (COPX).
If you are interested in trading copper stocks, be sure to do your research and choose a platform and instrument or set of instruments that meet your needs.
The two most popular copper ETFs are the Global X Copper Miners ETF (COPX) and the iPath Bloomberg Copper Subindex Total Return ETN (JJC).
The COPX ETF tracks a basket of copper miners, while the JJC ETF tracks the price of copper itself.
Both ETFs are traded on major US exchanges and offer exposure to copper without the need to own any physical metal or individual shares of a company.
Why Is Copper Useful?
Copper is an industrial metal that is used in a variety of applications, including electrical wiring, plumbing, and automotive manufacturing.
Copper is also used in a variety of other industries, such as construction, due to its durability and resistance to corrosion.
Copper is used in many different industries because it has a variety of unique properties that make it an ideal material for many applications.
Some of the most important properties of copper include:
- Copper is an excellent conductor of electricity, which makes it ideal for electrical wiring.
- Copper is also an excellent conductor of heat, making it ideal for use in plumbing and automotive applications.
- Copper is highly resistant to corrosion, making it an ideal material for construction applications.
FAQs – Copper Stocks
Why do copper prices move?
Copper prices are driven by a variety of factors, including supply and demand dynamics, inflationary pressures, currency movements, and geopolitical factors.
How are copper stocks traded?
Copper stocks can be traded in a few different ways, including through traditional brokerage accounts, commission-free stock trading platforms, and Exchange-Traded Funds (ETFs).
Can I trade copper without owning any physical metal?
Yes, you can trade copper without owning any physical metal. This can be done through futures contracts, ETFs, or CFDs.
What country is the top producer of copper?
The top producers of copper include Chile, Peru, China, and the United States. These countries are responsible for the majority of global copper production.
What is the most popular copper ETF?
The most popular copper ETF is the Global X Copper Miners ETF (COPX). This ETF tracks a basket of copper miners and is traded on major US exchanges.
Summary – Copper Stocks
The overall demand for copper is expected to continue to grow in the coming years as countries around the world industrialize and upgrade their infrastructure.
This may lead to higher prices for copper, which would be a positive catalyst for investors in copper stocks.
Additionally, many copper mines are located in politically stable countries, which reduces the risk of investments.
Popular examples of copper stocks include:
- Freeport-McMoRan (FCX)
- Southern Copper Corporation (SCCO)
- BHP Billiton Limited (BHP), and
- Rio Tinto plc (RIO)
Investors interested in copper stocks should keep an eye on global industrial production, climate protocols that will influence copper demand, infrastructure spending, and mine production levels.