The copper market is currently in a “significant deficit” phase, according to Goldman Sachs analysts. China’s demand for copper remains robust and has outperformed growth concerns, while a negative shock in mine supply further tightens the market. Moreover, the long-term global demand for copper continues to grow, driven by ongoing policy support for renewable energy and electric vehicles.
Copper plays a crucial role in various industries, including construction, and serves as a vital component in electric vehicles, utilized in batteries, wiring, charging points, and more. Encouraged by these prospects, several Wall Street analysts have shifted towards a bullish stance on the metal, predicting a potential price surge. Citi’s projections indicate that copper could experience a remarkable increase of almost 50% by 2025, reaching $12,000 per ton in their base case scenario. In a more optimistic bull case, prices could double to $15,000 per ton. Similarly, Goldman Sachs forecasted a 25% upside in copper prices over the next 12 months, with a target of $11,000 per ton.
While current copper prices may seem subdued, analysts and financial institutions project a promising future for this versatile metal, prompting investors to consider seizing the potential buying opportunity it presents.
Teck Resources Ltd (TECK)
Copper is expected to play a vital role in the shift away from fossil fuels, given it is essential for most electricity-related infrastructure, including wind turbines and solar photovoltaic panel wiring, and to transfer electricity.
Canada’s largest diversified miner Teck Resources Ltd recently produced its first bulk of copper concentrate from its Quebrada Blanca 2 (QB2) deposit in Chile, a project expected to almost double the amount of copper it annually produces. At total production, Teck expects QB2 to produce 285,000 to 315,000 tonnes of copper annually between 2024 and 2026. Overall, it expects to increase its copper production to between 545,000 and 640,000 tonnes per year in the same period.
The company is in the news after Switzerland-based commodities company Glencore raised its offer to buy Teck from the initial $22.5 billion proposition Glencore made in March. TECK’s share price is up 17% in 2023 and currently has a 72% buy rating on Wall Street.
Freeport-McMoRan (FCX)
Freeport-McMoRan, one of the leading copper producers worldwide, has established itself as a prominent player in the industry. Apart from copper, the company also engages in the production of gold and molybdenum, a crucial element utilized in the creation of high-strength steel alloys.
The crown jewel of Freeport’s impressive portfolio is the Grasberg mine located in Indonesia, renowned as one of the largest sources of copper and gold globally. Additionally, the company operates substantial mines in Arizona and Peru. In 2022 alone, Freeport achieved a remarkable copper production of 4.2 billion pounds.
Looking ahead, Freeport possesses an extensive organic development pipeline that holds the potential to significantly increase its copper production in the coming years. By implementing initiatives to enhance leaching, a chemical process employed to extract copper from ore, and potentially adopting new leaching technology, the company aims to augment its annual production capacity by an estimated 800 million pounds in the near and medium terms. Furthermore, several expansion projects are in the pipeline, projecting substantial production capacity growth over the medium and long term.
The company’s commitment to expanding copper production is expected to yield positive results for its shareholders through increased cash returns. Freeport has devised a framework aiming to allocate up to 50% of its excess cash flow towards shareholder returns, encompassing dividends and share repurchases. As the mining company’s copper production continues to grow, shareholders can anticipate enhanced cash rewards due to its strategic approach.
Global X Copper Miners ETF (COPX)
For anyone looking to buy into the sector, there is perhaps no better way to do so than through Global X Copper Miners ETF. COPX is the first ETF option for pure-play copper exposure in the equity space. The fund gets this exposure by tracking a market-cap-weighted index that offers broad equity exposure to the global copper mining industry. Although technically an international fund, it has strong North American exposure. The fund ranks companies according to their average daily trading volume with respect to its exchange over three months. The highest-ranked funds are included in the index. The index is rebalanced semi-annually.
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