Investing in Copper Stocks

Roberto Rivero

Many commodities have experienced strong price increases over the last couple of years, and copper is no different.

Over the last two years, the price of copper has risen more than 100%, recently hitting an all-time high in the process. So, how can you take advantage of high copper prices? One way is by investing in copper shares. In this article, we will highlight three of the best copper stocks to watch in 2022 as well as demonstrate how to invest in copper stocks with Admirals!

Why Invest in Copper?

When copper prices are high, companies which operate in the copper industry benefit and tend to perform better. As we have already seen, copper prices have been following an upward trajectory for the last couple of years, but past performance is no guarantee of future success.

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 will also grow.

Whilst global economic growth is forecast to slow down over the next couple of years (4.1% in 2022; 3.2% in 2023), demand for copper is expected to benefit from the global energy transition.

Copper is set to play a vital role in our transition to cleaner energy. 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 in the coming years.

Best Copper Stocks to Watch in 2022

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 shares 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).

What constitutes the best copper stocks may be subjective and differ depending on the goals and profile of each investor. However, below, we have highlighted three top copper stocks for investors to consider in 2022:

Top Copper Stocks for 2022
Southern Copper
Freeport-McMoRan Inc.
BHP Group

In the following sections, we will take a closer look at each of these top copper stocks.

Southern Copper

Southern Copper is a Mexican mining company who, 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 2021, approximately 81% of Southern Copper’s revenue was generated from copper production, which is undoubtedly a good thing if you are looking to gain as much exposure to copper as possible.

However, this does mean that Southern Copper’s success relies heavily 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 an investment in copper stocks.

In the year ending 31 December 2021, Southern Copper produced 958,000 tonnes of copper. By 2030, it forecasts that this figure will grow more than 80% to 1.7 million tonnes to meet growing demand for the metal.

Depicted: Admirals MetaTrader 5Southern Copper Corp. Weekly Chart. Date Range: 27 September 2015 – 13 April 2022. Date Captured: 13 April 2022. Past performance is not a reliable indicator of future results.

 

The shareholders of Southern Copper have certainly benefitted from rising copper prices over the past couple of years. In the two years ending 31 March 2022, Southern Copper’s share price gained 170%.

Higher copper prices have also allowed the company to increase its dividend payments, paying $3.20 per share in 2021, up from $1.50 per share the previous year. At the current share price, that gives this copper stock an attractive dividend yield of around 4.2%.

Freeport-McMoRan Inc.

Freeport-McMoRan is a US based company which, like Southern Copper, focusses primarily on the production of copper, but it also has significant gold mining operations. In 2021, 80% of the company’s revenue was generated from copper sales, whilst 11% came from gold.

Again, as with Southern Copper, the volume of Freeport’s copper sales make it a good option for investors who are primarily looking for exposure to the copper market. However, its smaller – but, nonetheless, significant – production of gold will 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.

Depicted: Admirals MetaTrader 5 – Freeport-McMoRan Inc. Weekly Chart. Date Range: 27 September 2015 – 13 April 2022. Date Captured: 13 April 2022. Past performance is not a reliable indicator of future results.

 

After spending much of the previous five years moving sideways, Freeport’s share price began a strong upward trend in March 2020. In the two years ending 31 March 2022, the company’s share price grew more than 630%.

Freeport also pays a modest dividend which, based on the current share price, gives a dividend yield of around 0.7%.

BHP Group

Unlike the previous two copper stocks we have highlighted, BHP Group is a far more diversified investment and, with a market capitalisation of almost USD $200 billion (14 April 2022), it is the largest mining company in the world.

Whilst copper production generates a large proportion of its 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 2021.

Segment Percentage of Total Revenue
Petroleum 6.49%
Copper 25.86%
Iron Ore 56.64%
Coal 8.47%
Other Operations (including nickel and potash production) 2.58%
Total Revenue US $60,817m

Source: BHP Group Full Year Results for Year Ended 30 June 2021

Although copper production makes up a smaller percentage of its total operations than the other two copper stocks we have seen, in the same time period as the table above, it produced 3,607m pounds of copper.

This is short of the 3,843m pounds produced by Freeport in the year ending 31 December 2021, but considerably higher than the 2,112.5m produced by Southern Copper. BHP also plans to continue expanding copper production to meet the growing global demand.

Depicted: Admirals MetaTrader 5 – BHP Group Weekly Chart. Date Range: 27 September 2015 – 14 April 2022. Date Captured: 14 April 2022. Past performance is not a reliable indicator of future results.

 

BHP had been following a long-term upward trend until August 2021, when its share price suddenly plunged amidst falling iron ore prices. However, share price has since recovered and, at the time of writing (14 April 2022), BHP is up 26.5% year to date and looks set to resume its upward trend.

However, 2021’s drop in share price 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 miner.

BHP, as with many big mining companies, pays a reliable and generous dividend out the company’s earnings. Currently, BHP has an impressive dividend yield of almost 10%.

Invest in Copper Stocks with Admirals

If you are interested in investing in copper shares, you will be pleased to know that, with an Invest.MT5 account from Admirals, you can buy shares in all three copper stocks highlighted in this article!

Other benefits of the Invest.MT5 account include:

  • Free access to the world’s number one multi-asset trading platform, MetaTrader 5
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INFORMATION ABOUT ANALYTICAL MATERIALS:  

The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals investment firms operating under the Admirals trademark (hereinafter “Admirals”) Before making any investment decisions please pay close attention to the following:  

  1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
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  3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for prevention and management of conflicts of interest.
  4. The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
  5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
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