A beginner in copper investing? This guide will introduce the relationship between supply and demand in copper investment and related investment methods.
Often nicknamed Dr. Copper, the red metal has long been held up as a critical indication of world economic health and is one of the most extensively studied base metals.
According to the US Geological Survey, copper is the third most used industrial metal in the world after iron ore and aluminum due to its great ductility and electrical conductivity.
Due to its properties, copper is frequently employed in electrical applications like power generation and transmission. According to experts, copper usage will more than double by 2030 due to demand from the green energy sector, just like its basic metal sibling nickel, which plays a significant part in the electric vehicle (EV) revolution.
Continue reading to learn how to invest in the red metal as well as an understanding of the supply and demand factors that affect the price of copper. For further information, you can also click the links to the left and below.
Copper Investing: Supply and Demand
The supply of copper is susceptible to disruptions in a variety of ways, much like the supply of any other commodity: environmental occurrences, worker strikes, economic changes, etc. As a result, it’s critical to monitor events in the world’s key copper-producing nations, including Chile, Peru, and China.
Production of copper ore has been affected by many setbacks in recent years, including a strike at one of the largest copper mines in the world, Codelco’s Chuquicamata mine, in 2019. Of course, COVID-19 pandemic lockdowns have also struck copper mines across the globe.
Although some analysts anticipate copper prices to continue high despite the possibility of a slight supply surplus, these and other problems have added to overall concerns about copper output.
On the strength of increased demand forecasts, copper experienced a breakthrough year in 2021, rising to an all-time high above US$10,700 per tonne. Analysts predict that increased EV and renewable energy use in 2022 and beyond will result in higher copper demand in China and across the globe.
Copper prices have recently been affected by the US-China trade conflict. China consumes more copper than any other country in the world, so any market impact from new Chinese import regulations on copper scrap might be significant. According to Reuters, China has been working to limit scrap imports in an effort to curb the transportation of foreign solid waste into the nation; yet, scrap accounted for 10 percent of China’s copper use last year.
As with any metal, supply constraints can cause price increases if demand is stable or increases. Investors that are interested in copper may wish to get involved sooner rather than later because the equilibrium between supply and demand is erratic.
Investing in Copper: How to do it
There are numerous ways to participate in the copper market. Exchange-traded funds (ETFs), futures, and mining stocks are typical ways to profit from copper, much like with other commodities.
Investors can indirectly access the copper market in the case of a copper ETF by looking for funds that have a focus on copper or copper-mining firms.
According to InvestingAnswers, “(Futures) allow buyers and sellers to ‘lock in’ the price at which they buy or sell an asset in the future.” Copper futures contracts give investors a chance to participate in the market in a lower-risk manner. For individuals who are in the market, this has a small safety net impact.
The last option is copper stocks, which are riskier but offer one of the quickest paths to the market. Investors can acquire shares in corporations involved in copper mining, development and exploration, and ride the ebb and flow of both these companies’ success and the copper price.
The main copper mining firms 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 large corporations can make a good place to start.
