Copper prices have been subjected to tariff news volatility though the industrial metal is up for the year. Fundamentally, supply bottlenecks could provide a catalyst for prices to remain on the bullish side. “Bullish” indicates an expectation that prices are rising and will continue to rise in the future.
President Trump could place tariffs on copper, which is helping to spike demand. As mentioned in Oil Price, new production could help offset higher demand, but the pace may not be able to keep up.
“Despite the above aggregate gains, physical copper supply continues to hit bottlenecks,” Oil Price mentioned. “Not all copper is created equal, and a lot of the new mine output is concentrate that still needs smelting. Concentrate shortages have already pushed treatment charges for smelters into negative territory, an unusual situation signaling that smelters are scrambling to secure raw material.”
One of the biggest areas that will fuel copper demand in the coming years will be the rise of data centers. As artificial intelligence, machine learning, cloud computing, and other emergent technologies become more prevalent, they will require more electricity. In turn, this could also boost copper demand. The International Copper Study Group (ICSG) noted that data centers will be primed to soak up copper supply, which was also supported by data from Morgan Stanley.
With copper demand set to grow, investors may want to capitalize on this growth opportunity. One sector is copper mining, but more specifically, small-cap companies.
Big Gains for Small-Caps?
With a lot of market uncertainty to go around, investors like the safety that large-caps can bring. As the market continues to recover from April’s tariff sell-off, small-caps could also make a return to form, especially at the value they’re currently offering.
For small-cap copper mining exposure, consider the Sprott Junior Copper Miners ETF (COPJ). The fund mixes in exposure to small- and micro-cap companies, offering high growth potential. To balance that risk, the fund also invests in midcap companies. These companies offer a mix of large-cap characteristics with a tinge of growth from small-cap equities.
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Funds that emphasize investments in small/mid-cap companies will generally experience greater price volatility. Diversification does not eliminate the risk of investment losses. ETFs are considered to have continuous liquidity because they allow an individual to trade throughout the day. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses, affect the Fund’s performance.
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Exchange Traded Funds (ETFs): GBUG, SLVR, SETM, LITP, URNM, URNJ, COPP, COPJ, NIKL, SGDM and SGDJ
