Investing in Copper Stocks
Despite copper prices plunging in 2022, they remain at high levels historically and, with copper demand set to climb higher as we transition to net zero emissions, the industry is likely to benefit over the coming years.
But which copper mining stocks are best positioned to thrive from the transition to a low carbon world? Which are the best copper companies to invest in? In this article, we will highlight 3 of the best copper stocks to watch in 2024!
Table of Contents
Why Invest in Copper?
When copper prices are high, companies which operate in the copper industry benefit and tend to perform better. So, what does the future look like for copper demand?
Copper is a key material in construction and transport infrastructure, meaning that its demand - and, therefore, price – is positively correlated with global economic growth. In other words, when the global economy is growing, demand for copper also tends to grow.
Whilst global economic growth is forecast to continue to slow down over the next couple of years, demand for copper is expected to benefit from the global energy transition, in which it is set to play a vital role.
Thanks to its highly efficient conductivity, copper is a key component in the construction of electric vehicles and is also an important material in renewable energy systems. Demand for both of these uses of copper is expected to grow significantly in the coming years.
The Best Copper Stocks to Watch
There are many ways in which investors and traders can gain exposure to copper, one of which is by investing in copper stocks.
It is important to note that the price of copper will not be the sole factor for a copper producing company’s success. There are many other aspects to consider when investing in a company, in particular, the fundamentals of the company in question.
Whilst the performance of copper mining stocks may not exactly mirror the performance of the physical commodity, they are arguably more suitable for investing in copper over the long-term than using derivative products such as Contracts for Difference (CFDs).
In the following sections, we will take a look at 3 top copper stocks to consider in 2024.
Southern Copper
Southern Copper is a Mexican mining company which, as the name suggests, primarily deals in the production of copper - of which it claims to have the largest reserves in the world. However, as with most mining stocks, its operations are not strictly limited to a single type of metal, it also produces copper by-products silver, zinc and molybdenum.
In the three years ending 31 December 2022, copper accounted for roughly 79% of Southern Copper’s net sales. This is likely to be a good thing if you are looking to gain as much exposure to copper as possible.
However, this also means that Southern Copper’s performance is highly dependent on the price of copper. When copper prices are high, as they are now, the company will perform well but, if copper prices fall, the company’s results will feel the impact. This is certainly something to bear in mind when considering investing in copper stocks.
After a very positive year in 2020, in which share price leapt more than 50%, Southern Copper’s share price fell by more than 7% over the following two years. The year 2023 saw share price recover well, climbing almost 25% in the first nine months of the year.
Higher copper prices in recent years have allowed the company to increase its dividend payments in recent years, paying $3.50 per share in 2022, up from $1.50 per share in 2020. At the current share price, this copper stock has an attractive dividend yield of 5.4%.
Freeport-McMoRan Inc.
Freeport-McMoRan is a US based company which, like Southern Copper, focuses primarily on the production of copper, but it also has significant gold mining operations.
In 2022, more than 80% of the company’s revenue was generated from copper sales, whilst 15% came from gold.
Again, as with Southern Copper, the scale of Freeport’s copper production makes it a good copper stock for investors who are primarily looking for exposure to the copper market. However, its smaller – but, nonetheless, significant – production of gold will also appeal to those investors who are more risk averse.
This is because gold is a safe haven asset, whose price tends to be resilient to market downturns. Therefore, should there be a downturn in the commodity market, Freeport’s gold production could potentially provide value in terms of offsetting losses elsewhere.
Freeport’s share price soared in 2020, gaining 98% and, although share price has been very volatile, the copper stock managed to gain a further 46% in the following two years. In the first nine months of 2023, share price remained flat.
Freeport also pays a modest dividend which, based on the current share price, gives the copper stock a dividend yield of 1.6%.
BHP Group
Unlike the previous two copper mining stocks we have highlighted, BHP Group, which is the largest mining company in the world by market capitalisation, is a far more diversified investment.
Whilst copper production generates a large proportion of total revenue, iron ore actually accounts for a higher percentage of this figure. Below is a table which shows the percentage of revenue generated by the company’s different operations for the year ended 30 June 2023.
Source: BHP Group - Full Year Results for Year Ended 30 June 2023
Although copper production makes up a smaller percentage of its total operations than the other two copper mining stocks we have seen, it generates far more revenue from copper sales than Southern Copper, although not quite as much as Freeport.
BHP had been following a long-term upward trend until August 2021, when its share price suddenly plunged amidst falling iron ore prices. In the two years since, share price has been sporadic, falling more than 8% in the first nine months of 2023.
The drop in share price in 2021 highlights the risk of the company’s reliance on iron ore prices. This is certainly something to bear in mind if considering investing in this copper stock.
BHP, as with many big mining companies, has a history of paying dividends from the company’s earnings, with an attractive dividend yield of 6% at the time of writing.
Invest in Copper Stocks with Admiral Markets
If you are interested in investing in copper shares, you will be pleased to know that, with an Invest.MT5 account from Admiral Markets, you can buy shares in all three copper stocks highlighted in this article! Click the banner below to open an account today:
Investing in Copper FAQ
How Do I Invest in Copper?
There are a number of ways for investors to gain exposure to copper, including buying shares in copper mining companies, investing in copper ETFs and buying the physical commodity itself.
Who Is the World's Largest Copper Producer?
Chile is by far the largest copper producing country in the world, accounting for roughly a quarter of the global supply.
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