Copper prices skyrocketed to over $4.1 per pound, hitting their highest point in more than eleven months. This surge followed an agreement among leading Chinese copper smelters to scale back production at facilities that were no longer profitable due to a lack of raw materials. The decision was prompted by a steep drop in copper concentrate prices, which had reached their lowest levels in a decade, putting a strain on smelters' profitability.
Specific production limits have not been set. Each smelter will assess its operations and make necessary adjustments. Alternative strategies have been explored, such as increasing the use of copper blister, to lessen dependence on copper ore concentrate in manufacturing processes.
Copper, a long-term investment opportunity?
While Copper prices can be subject to significant swings due to changing macroeconomic and geopolitical factors, its indispensable role across various applications and its significance in the energy transition cannot be overlooked. According to forecasts by BloombergNEF (June 2023), copper consumption is expected to surge to 43 million metric tonnes by 2050, up from 26 million in 2022.
However, the supply might struggle to keep pace with the escalating demand, potentially creating a shortage that could bolster copper prices and offer enticing opportunities for investors.
How to participate in the rise in copper prices through ETFs
When contemplating investments associated with copper, you essentially have two primary options: Copper ETFs, which mirror the metal's performance through futures contracts, and Copper Miner ETFs, which focus on companies actively engaged in copper mining. Both options carry their own set of advantages and risks, influenced by market conditions, operational variables, and global economic trends.
Copper ETFs offer a straightforward way to speculate on copper prices directly, while Copper Miner ETFs allow investors to potentially profit from the operational performance of mining firms, including benefits like dividends. However, this comes with additional operational risks associated with the mining industry.
Looking into Copper ETFs, one prime example is the COPA ETF by WisdomTree. This ETF provides investors with a cost-effective route to tap into the returns of copper futures contracts, mirroring the performance of the Bloomberg Copper Sub Total Return Index (BCOMHGTR). It is listed on the Borsa Italiana exchange and boasts a total expense ratio of 0.49%.
For those interested in investing specifically in copper miners, a standout choice is the Global X Copper Miners UCITS ETF (4COP), holding a significant €56 billion in assets under management. This ETF aims to mirror the Solactive Global Copper Miners Total Return Index, granting investors exposure to a diverse range of copper mining companies.
When it comes to geographical distribution, 4COP has allocations to various countries, including Canada (35.8%), the United States (9.8%), China (9.4%), Australia (9%), Japan (8.6%), among others. With a total expense ratio of 0.55%, 4COP also trades on the London Stock Exchange.