With some economists sounding the inflation alarm, countless investors search for an investment opportunity to ride out the storm. While some of the markets have slumped, metals have continued their gains.
Copper mining stocks in particular have enjoyed a surge in price following good outlooks about post-pandemic economic growth. Before the pandemic, copper was trading under $3.
But as 2020 progressed, copper prices began to rise, finishing the year at $3.51. Then at the beginning of May, copper prices shot to a record high of $4.71 per pound.
What explains this sudden rise in copper prices? Well, if you aren’t familiar with the red metal, you should be because it’s practically everywhere.
Copper is a great electrical conductor making it perfect for wiring and electronics, including electronic vehicles or EVs. The versatility and cheap price of copper makes it a perfect choice for construction as well.
With it being in such high demand, should you be investing in copper stocks in 2021? Let’s get into the details to help you make a smart investment decision.
China Stockpiles Copper Supplies
With how widely copper is used, it’s no surprise that it’s in such short supply. Despite mining and recycling efforts, the demand for copper has outpaced its supply.
This has brought the world’s two largest economies, the US and China, to compete for copper supplies. The US finds itself disadvantaged because China is not only the world’s top consumer of copper—but also its second-largest supplier.
China’s access to copper supplies keeps them off the market, driving up prices for other countries. The aggressive move to gobble up much of the copper supply can be to your advantage.
How China Can Help You Profit From the Copper Market
China’s massive appetite for copper can work in your favor if you invest wisely. In 2019 alone, the Chinese copper market consumed over 51% of the world’s refined copper supply and showed no signs of slowing.
This move played a large role in copper’s price nearly hitting $5 per pound. With this trend likely to continue, now is your chance to cash in by investing in copper mining stocks and ETFs.
But China is not alone. The US and European Union have made efforts to phase fossil fuels out and replace them with green technology.
Green Revolution With Copper
As you may have seen in the news, President Joe Biden unveiled a two-trillion-dollar infrastructure plan. The plan will include fixing and creating new public infrastructure pieces such as roads, bridges, and more.
Undoubtedly, a steady supply of copper will be needed to complete these projects and more ambitious goals set by the administration, such as phasing out fossil fuels.
While infrastructure may seem ambiguous, the plan expands beyond roads and bridges to include a $174 billion electric vehicle investment.
The investment will address the need to upgrade manufacturing facilities and help local communities install charging stations.
So, clearly, the green revolution without copper isn’t possible. Consider that constructing 1000 EV batteries requires around 83 metric tonnes of copper.
Meeting the demand for EVs and the pressure to phase out fossil fuels will mean an increased appetite for copper, which has become known as the “green metal.”
While governments compete, you can profit. Take this time to learn more about the copper market so you can place a smart investment.
Tips for Investing in Copper
When it comes to copper, the two easiest ways to invest are buying mining stocks or going with an exchange-traded fund (ETF).
Copper mining stocks are an investment in a company that mines for metals, such as copper. You can find companies that solely mine copper, while others mine different metals.
Most metal mining companies are looking for other basic and precious metals to sell, although copper is at the top of their lists.
On the other hand, copper-focused ETFs are not common, although some small ones do exist. If you’re unfamiliar with ETFs, they are similar to mutual funds except they’re traded on the market and their price is determined just as common stocks are.
Do you plan on investing directly in a mining company? The first thing you’ll want to do is research that company.
Understand what location they’re mining at, what their debt level is on their balance sheet and the quality of their resources.
With just a bit of research, you can determine whether your copper mining company investment is sound.
For those who wish to gain exposure to the copper market, going with an EFT is a great choice. With an EFT, you won’t need to research individual companies, but instead the industry as a whole.
And since an ETF works similarly to an index, it’s also a great way to reduce your risks and diversify your portfolio.
3 Copper Stocks to Watch
Are you ready to profit from the copper market? Don’t start investing until you’ve checked out these mining companies’ stocks. Here are three copper companies’ stocks to keep an eye on.
Codelco is the largest producer of copper in the world and is owned by the Chilean Government. Not only does the state-owned company produce the most copper; it also sits on the world’s largest copper reserve, approximately 8% of the world’s supply. With copper demand only going up, this company is a prime investment opportunity.
BHP (NYSE: BHP)
BHP is a global resource company that focuses on producing commodities such as copper. The company operates mainly out of the US and Australia, where it extracts and processes minerals, oils, and gas. Despite producing so many commodities, BHP focuses on keeping operations low-cost by incorporating new technology. The focus on keeping costs low is a good sign for investors that this company is under capable management.
Rio Tinto (NYSE: RIO)
Rio Tinto is another mining company that produces multiple commodities, including the top consumed materials—copper, iron ore, and aluminum. Similar to BHP, Rio Tinto aims at keeping operational costs low by investing in new technologies. In doing so, they’ve managed to increase productivity as well. Additionally, the company makes smart investments in itself, such as expanding its most productive mines and staying on top of debt.
Stay up-to-Date With the Copper Market and More With Dear Retail
The copper market is on the rise, creating the perfect opportunity for investors to invest in Copper Stock Market. Those who stay up to date with market trends have a better understanding of it and can make smarter decisions. So how will you?
Join other like-minded investors and become a Dear Retail Investor. Becoming a part of the Dear Retail community also means gaining access to reports and analyses of companies on the rise. As your go-to source for all things small-cap investing, you’ll learn new strategies and ideas that’ll make you money. Staying up to date with copper stocks in 2021 has never been easier than with Dear Retail.