Investing in copper stocks

Copper is in a ton of everyday things, from smartphones to cars. The importance of this commodity in the world creates many investment opportunities. Interested in adding copper to your portfolio? Here is what you need to know.

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What is copper?

History of copper

Copper’s importance dates back to over three thousand years ago when ancient Egyptians fused it together with tin to make bronze. They then used bronze to make tools, coins, jewelry and statues.

Copper in electric cars and appliances

Copper is a semi-precious metal with a wide range of uses due to its unique properties. It is one of the best conducting metals, is extremely malleable, is highly resistant to corrosion and is easily recyclable. Because of this, copper plays a big role in things we use every day. For example, copper is in electric cars, laptops, smartphones, power lines, heating pipes, kitchen appliances, and so much more.

Where and how do you mine copper?

Copper is mined from copper ore. This rock can be found in various places around the world. The largest amounts of copper ore are mined in Chile, Peru, Mexico, the United States and Indonesia. An ore usually only contains one percent of copper. Through a chemical process, the copper is extracted from the rock. The copper that remains is then melted and shaped into the desired shape.

What is copper?

Copper’s importance dates back to over three thousand years ago when ancient Egyptians fused it together with tin to make bronze. They then used bronze to make tools, coins, jewelry and statues.

Copper is a semi-precious metal with a wide range of uses due to its unique properties. It is one of the best conducting metals, is extremely malleable, is highly resistant to corrosion and is easily recyclable. Because of this, copper plays a big role in things we use every day. For example, copper is in electric cars, laptops, smartphones, power lines, heating pipes, kitchen appliances, and so much more.

Copper is mined from copper ore. This rock can be found in various places around the world. The largest amounts of copper ore are mined in Chile, Peru, Mexico, the United States and Indonesia. An ore usually only contains one percent of copper. Through a chemical process, the copper is extracted from the rock. The copper that remains is then melted and shaped into the desired shape.

Reasons to invest in copper stocks

The demand for copper has increased significantly in recent years. This demand comes mainly from the construction industry, but a lot of copper is also used in the energy sector and for the production of electric vehicles, solar panels, charging stations and wiring in the power network. As long as the world's population continues to grow, there will be a demand for copper.

Risks

Prices for commodities including oil, gold, silver and copper are volatile and often cyclical. This means there are always times when there is high demand for a commodity and times when demand can (sharply) decline. Although copper prices have been on the rise for many years, this could change at any time. It is expected that the long-term demand for copper will increase, but there can still be price fluctuations in the meantime.

In April 2022, China announced measures to prevent another Covid-19 outbreak. The metropolis of Shanghai went into lockdown, having a direct effect on the price of copper. The shutdown of construction, and all other activity, reduced the demand for copper. Once the price of copper declines, mining companies that mine copper also make less profit. The market reacts to this, causing share prices of copper-related stocks to fall.

The 5 most traded copper stocks of 2022

Since investing in copper is popular, here are the most traded copper stocks of 2022 via our platform:

Southern Copper (US84265V1052) is a Mexican company that has been in the mining industry for 70 years. At the time of writing, the company is 88.9% owned by Grupo Mexico, a Mexican conglomerate active in mining projects. The remaining 11.1% of interests are traded on the New York Stock Exchange. The company has a market cap of approximately $43 billion.

Southern Copper has copper mines in Mexico and Peru. Most of the copper is mined in Mexico. The company, by its own admission, has the largest reported copper reserves of any mining company in the world (SCCO). It is therefore expected that the company is able to keep on mining with their current reserves for years.

The company plans to increase its production every year until 2028. Southern Copper mines 951 thousand tons of copper annually, and expects to mine 1.9 million tons of copper by 2028 (Zacks Equity Research). A major advantage of the company is that it is known to extract copper at a low cost. This means that, compared to competitors, more profit is made on the same amount of copper mined.

Western Copper and Gold (CA95805V1085) is a Canadian mining company founded in 1996 and it came on the stock market in 2006. It is traded on the Toronto Stock Exchange and the New York Stock Exchange. The company is not yet making a profit because it is not yet mining resources. They do own several mining rights but production at these sites has yet to be set up.

The largest project that Western Copper and Gold Corporation is yet to set up is the so-called 'Casino project'. This involves a piece of land located in the Yukon Territory of Canada. Since 2007, they have been exploring, doing test drills and obtaining mining rights in the area. The company says it wants to extract raw materials from the ground in a responsible way. In doing so, it is mindful of the environment and the indigenous people of the Yukon.

In the next few years, the company expects to start production. The results from drilling for copper and gold are positive. Rio Tinto (the world's 2nd largest mining company) also has confidence in the project. Rio Tinto purchased about 8% of the shares of Western Copper and Gold Corp in mid-2021.

Freeport-McMoRan (US35671D8570) is an American mining company. It is one of the largest producers of molybdenum and copper in the world. In 2019, 79% of the company’s revenue came from the sale of copper (Freeport McMoRan). This makes copper the most important raw material for the company.

Most of the mining sites owned by the company are in the United States. It also has projects in Congo, Finland, Chile, Peru, Indonesia and Spain.

This exchange-traded commodity (ETC) from WisdomTree (GB00B15KXQ89) tracks the price of copper based on futures contracts. On the annual return of this ETC, WisdomTree charges a 0.49% management fee.

Glencore (JE00B4T3BW64) is an Anglo-Swiss mining and trading company. In addition to copper, the company trades aluminum, zinc, lead, petroleum, coal and many other commodities. It is also actively trades agricultural products, such as grain. On every continent except Antarctica, Glencore has projects where raw materials are extracted and/or traded. In 2020, the company produced 1.26 million tons of copper with a market value of $86 billion. In 2021, copper production accounted for 46% of the company's total EBITDA.

In 2015, Glencore came under considerable pressure due to falling commodity prices, leaving the company with significant debt. For this reason, Glencore did not issue dividends for a year and a half and sold several business units to pay off the debt. The company's share price fell significantly during that time. Of the $30 billion debt in 2015, $6 billion was left unpaid in 2021. The company says it will continue to focus on paying off debt and pushing through cost-saving restructuring in the coming years.

Invest in copper through DEGIRO

At DEGIRO, there are several ways to invest in copper. We have a wide range of copper-related investment products, including stocks of companies that mine copper and copper-related ETFs and ETCs.

We are known for our low fees. By saving on transaction costs, you can create a higher return in the long run. Open an account with DEGIRO and make the most of your investments.

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