New to copper investing? Check out this page to learn how supply and demand works, along with tips on where to place your chips.
Dubbed the red metal, copper is a soft, malleable metal that belongs to the base metals family.
Due to its various properties, such as high ductility and electrical conductivity, it is the third most consumed industrial metal in the world behind iron and aluminum, as per the US Geological Survey.
Given its attributes, copper is often used for electrical purposes such as power transmission and generation. Like its base metal sibling nickel, copper has played a major role in the electric vehicle (EV) revolution, with experts expecting consumption of the metal to grow 250 percent by 2030 due to EVs.
Read on to get an idea of copper’s supply and demand dynamics and also how to invest in the red metal.
Copper investing: Supply and demand
Similar to any other commodity, copper supply can be prone to disruption in various capacities: environmental events, worker strikes, economic fluctuations and so on. As such, it’s important to keep an eye on what’s happening in the world’s major copper-producing countries, such as Chile, Peru and China.
2019 has seen a handful of disruptive production hiccups, including a strike at Codelco’s Chuquicamata mine, known as one of the world’s biggest copper mines. The issues have contributed to big picture concerns, with some experts nervously anticipating an eventual deficit in copper supply.
While that copper deficit may not come to fruition for quite some time, copper’s long-term demand outlook remains strong. According to the Copper Development Association, copper demand driven by EVs is expected to grow by 1,700 kilotons by 2027.
Ongoing trade war issues between China and the US have also had a notable impact on copper as of late. With China being the world’s largest copper consumer, new Chinese import restrictions on copper scrap could put a substantial dent in the market.
According to Reuters, China has been working to limit scrap imports in an effort to reduce the shipment of foreign solid waste into the country; however, the outlet notes that scrap accounted for 10 percent of China’s copper use last year.
As with any metal, supply shortages can lead to jumps in price, assuming demand remains intact or rises. The balancing act of supply and demand is fickle, and investors who are curious about copper may want to get involved sooner rather than later.
Copper investing: How to invest
In the case of ETFs, investors are able to access the copper market indirectly by looking at funds focused on copper or copper mining companies.
Futures give investors a chance to take part in the market in a lower-risk fashion; according to InvestingAnswers, “(Futures) allow buyers and sellers to ‘lock in’ the price at which they buy or sell an asset in the future.” This creates a bit of a safety net effect for those on the market.
Lastly, there are copper stocks, which are one of the most direct routes to the market. Investors can buy shares of companies involved in copper mining and ride the ebb and flow of both the company’s performance and the price of copper.
For reference, some of the largest copper mining companies are Freeport-McMoRan (NYSE:FCX), Glencore (LSE:GLEN,OTC Pink:GLCNF), BHP (ASX:BHP,NYSE:BHP,LSE:BLT) and Rio Tinto (LSE:RIO,NYSE:RIO,ASX:RIO).
Want to learn more about copper investing? Check out the articles below:
- 7 Basic Copper Facts for Investors
- A Look at Historical Copper Prices
- LME Copper vs. COMEX Copper
- Types of Copper Deposits in the World
- Copper Ore Types: Sulfides vs. Oxides
- Copper Refining: From Ore to Market
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.