The 29th periodic element, copper is a crucial part of the industrial world thanks to its various uses. Copper is a key component of many renewable technologies, such as electric vehicles and solar panels, which gives it a crucial role to play in the push to decarbonize our planet. Goldman Sachs expects the copper demand for renewable technologies to explode from 1 million tonnes in 2021 to just under 6 million tons by 2030, suggesting a bright future for this important commodity. Before looking for how to invest in copper, it’s wise to first understand the dynamics that drive its market.
Factors Affecting The Copper Market
Demand and supply drive all markets, and commodities are no different. Economics 101 teaches us that, at the core, markets are a function of demand and supply. The price of a stock, bond, cryptocurrency, or commodity is discovered in the dynamic exchange between buyers and sellers. When it comes to metals, buyers and sellers could have different goals, including investing for the long-term, speculating, buying the metal for manufacturing or hedging their exposure to the price of a metal.
Demand and supply are therefore the first data points to look at when analyzing the copper markets. Supply is driven by:
Reserves – the supply of copper that has either been mined already or can be profitably mined using existing technology.
Resources – the supply that is either undiscovered or impossible to mine at a profit.
Production – the supply of copper that is extracted and processed each year.
In terms of the demand for copper, China is by far the world’s leading consumer of copper and accounted for 52% of all copper consumption in the world in 2021. Copper demand stems from many areas. Copper is a brilliant conductor of electricity, making it an ideal material for electrical wiring in homes, buildings, and other structures. Durable, long-lasting, and 100% recyclable, copper is ideal for many types of ‘green’ machinery, such as motors, generators, and transformers. Artists and jewelers also enjoy molding copper into objects of beauty thanks to its malleability and durability.
Before choosing whether or not to invest in copper, it’s helpful to consider the macro factors that impact commodity prices, such as interest rates and the strength of the US dollar. Commodity prices fell in 2022 as interest rates rose and investors flocked to the US dollar as a safe haven during tough economic times.
What’s the Best Way To Buy Copper?
Investors have many options available should they wish to buy copper, each with its own set of characteristics.
Buying physical copper is one way to invest in copper, although the cost of storing and shipping in the form of bars or ingots is the most obvious way to invest in copper. However, buying physical copper means having to incur the cost of shipping and storing the metal, turning it into an illiquid asset that’s difficult to train.
Thankfully, there are various ways to invest in copper that don’t involve taking delivery of the physical metal. Investors and traders to gain exposure to the price of commodities, or hedge the risk of price fluctuations on their business, can choose between copper futures, copper ETFs, and copper stocks.
A copper futures contract is an agreement to buy or sell copper at a specific price in the future. The most popular futures contracts are issued by the Chicago Mercantile Exchange (CME.) Futures can either be traded directly or through a synthetic product that tracks the price of the copper futures, known as a CFD (Contract For Difference.) CFDs are leveraged products that carry more risk than buying the underlying asset and should be explored with great caution.
Copper exchange-traded funds (ETFs) are investment vehicles that offer exposure to copper either through holding copper futures directly or by purchasing copper stocks.
Investing in copper stocks is another option for those looking to add copper to their portfolio. The stock prices of companies that engage in mining, producing, refining, or manufacturing copper are directly tied to the commodity itself.
4 Copper Investments To Consider (Copper Stocks, Copper ETFs & Copper Futures)
- Freeport-McMoRan Inc. (FCX): Freeport-McMoRan is a leading copper mining company with operations in the Americas and Indonesia. As such, its stock price is closely tied to the price of copper.
- Southern Copper Corporation (SCCO): Southern Copper is a diversified mining company that produces copper, molybdenum, zinc, and other metals. Copper accounts for a significant portion of its revenue and production.
- Global X Copper Miners ETF (COPX): This ETF tracks the Solactive Global Copper Miners Index and holds a basket of copper mining stocks from around the world.
- iPath Bloomberg Copper Subindex Total Return ETN (JJC): This exchange-traded note (ETN) tracks the Bloomberg Copper Subindex Total Return, which is designed to reflect the performance of the global copper market. It does this by holding futures contracts on copper.
Where Is The Best Commodities Trading Platform To Buy Copper?
Key Copper Statistics
Copper’s atomic weight: 63.546
Copper’s melting point: 1084.62 °C (1984.32 °F)
Copper’s boiling point: 2562 °C (4643.6 °F)
Copper resources are estimated at more than 2 trillion tons.
Copper reserves are estimated at 830 million tons.
Copper is the third most abundant metal in the Earth’s crust, after aluminum and iron.
Copper is available in nature as a native metal and in ores such as chalcopyrite, bornite, and malachite.
Chile is the biggest producer of copper in the world. It produced 5.6 million metric tons of copper in 2021.
Is Copper a Good Investment?
Humanity will never run out of demand for commodities like copper, which gives commodities like copper a strong foundation as an investment. Nevertheless, commodity prices are highly reactive to macro factors such as supply shocks, political events, war and climate change. Every investor needs to weigh up the risk and rewards of a potential investment, including an investment in copper.