How to Invest in Copper

New to copper investing? This is the Investing News Network’s hub for educational content on copper.

Often termed Dr. Copper, the red metal has long been held up as a key indicator of global economic health and is one of the most highly followed base metals.

Copper’s high ductility and electrical conductivity make it the third most consumed industrial metal in the world, behind iron ore 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, it has a major role in the electric vehicle (EV) revolution, with experts expecting consumption of copper to grow 250 percent by 2030 due to EVs.

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Read on to get an idea of the supply and demand dynamics that move the copper price, and also how to invest in the red metal. You can also click through the links above and below for more details.

Copper investing: Supply and demand

Similar to any other commodity, copper supply can be prone to disruptions 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.

The past few years have brought several disruptions to copper ore production, including a strike at Codelco’s Chuquicamata mine in 2019, known as one of the world’s biggest copper mines, and of course 2020’s COVID-19 pandemic lockdowns, which impacted copper mines across the globe.

These and other issues have contributed to big picture concerns for copper output, 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 kilotonnes 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.

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Copper investing: How to invest

There are a variety of ways one can get involved in the copper market. As with other commodities, exchange-traded funds (ETFs), futures and mining stocks are common methods of capitalizing on copper.

In the case of a copper ETF, investors are able to access the copper market indirectly by looking at funds focused on copper or copper mining companies.

Copper futures contracts 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 in the market.

Lastly, there are copper stocks, which can be risky, but 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 these companies’ performance and the copper price.

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). These big companies could be a safe place to start.

If you’re interested in the copper market and copper investing, click through the links listed above and below to learn more about this exciting base metal.

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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.