The red metal, also known as Dr. Copper, is one of the most closely watched base metals and has long been regarded as a significant indicator of the state of the world economy.
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 high ductility and electrical conductivity.
Due to its properties, copper is frequently used in electrical applications like power generation and transmission. Like its base metal sibling nickel, copper plays a significant role in the electric vehicle (EV) revolution. According to experts, the demand for copper from the green energy market is expected to increase five-fold by 2030.
Continue reading to learn how to invest in the red metal as well as an understanding of the supply and demand dynamics that affect the price of copper. For more information, you can also click the links to the left and below.
Supply and demand in copper investment
The supply of copper is susceptible to disruptions in a variety of ways, just like the supply of any other commodity: environmental occurrences, worker strikes, economic fluctuations, etc. As a result, it’s critical to monitor events in the world’s major copper-producing nations, including Chile, Peru, and China.
Production of copper ore has been affected by several 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-
Copper mines around the world have also been affected by 19 pandemic lockdowns.
Although some experts anticipate copper prices to remain high despite the possibility of a slight supply surplus, these and other problems have added to overall concerns for copper output.
Due to higher demand expectations, copper had a breakthrough year in 2021, hitting an all-time high above US$10,700 per tonne. The demand for copper is expected to rise in China and around the world in 2022 and beyond due to increased EV and renewable energy use, according to analysts.
Copper prices have recently been affected by the US-China trade war. China consumes more copper than any other country in the world, so any market impact from new Chinese import regulations on copper scrap could be significant. China has been trying to reduce the amount of foreign solid waste that enters the nation, according to Reuters, but last year, scrap accounted for 10% of China’s copper consumption.
As with any metal, price increases due to supply restrictions may occur if demand remains the same or rises.Investors who are curious about copper may want to get involved sooner rather than later because the supply-and-demand equation is erratic.
Investing in copper: How to do it
There are lots of ways to participate in the copper market. Exchange-traded funds (ETFs), futures, and mining stocks are typical ways to profit from copper, just like with other commodities.
Investors can indirectly access the copper market in the case of a copper ETF by looking at funds that have a focus on copper or copper-mining companies.
Investors can participate in the market less riskily with copper futures contracts because, as stated by InvestingAnswers, “(Futures) allow buyers and sellers to ‘lock in’ the price at which they buy or sell an asset in the future.” For those who are in the market, this has something of a safety net effect.
The last option is copper stocks, which are risky but offer one of the quickest paths to the market. Investors can ride the ups and downs of both the performance of these businesses and the price of copper by purchasing shares of companies engaged in copper mining, development, and exploration.