Mining stocks are surging as rising copper prices shows no signs of slowing
Copper prices beat their previous all-time high of 2011 to a smashing $10,190 last week and mining stocks are surging. While their 2011 price surge was fueled by one country – China and its reliance on raw materials for their economic growth – this time around, the entire globe is clamoring for copper.
If going green is the future, then so is copper
As the world shifts to more environmentally friendly solutions, copper plays a crucial role in many growing industries as an electrical and thermal conductor.
The rise – fueled by the recent global effort to cut carbon emissions – have analysts predicting that this is just the beginning:
- Increasing demand – Electric Vehicles (EVs), predicted to eliminate gas vehicles in the very near future, use 4x more copper than regular vehicles. Charging stations for EVs also rely on copper wiring.
- Limited supply – Copper mines are being depleted, while finding and developing new ones is hard and dangerous work.
As countries turn to renewables and ramp up production of batteries, solar panels, and wind turbines to meet the terms of the Paris climate agreement, investors are buying up copper as a bet that they follow through on their emissions targets.
Mining stocks are digging these prices
Copper prices took a hit at the beginning of the pandemic, falling under $5K, but have since steadily trended upwards – a blessing for share prices of mining companies:
- Freeport-McMoRan ($FCX) – the US’s largest miner by market cap is up 774%.
- First Quantum Minerals ($FM) – a Canadian company mainly mining copper is up over 600%.
- U.S. Copper Index Fund ($CPER) – a fund that tracks copper futures for the country is up 219%.
Both Goldman Sachs and Trafigura Group – the world’s top copper trader – believe prices could soar as high as $15k in the coming years, nearly 50% higher than they are today. Goldman Sachs even went as far as declaring copper “the new oil”.
Before investors head to the ‘Copper’ Rush…
Commodities are not your typical “set it and forget it” long-term investments but rather cyclical ones that require some planning.
- Cyclical investments move up and down alongside market cycles.
- They go through long multi-year periods of decline or growth.
For these reasons, investors should be ready to exit upon cue when investing in commodities.