The ongoing global electrification is spurring a demand for copper. But supply shortages could portend higher prices in the future. As such, this provides a bullish backdrop for the industrial metal.
Per a Financial Times article, the largest players in this mining industry are predicting more collaboration with consumers as demand for the industrial metal increases. Copper mining executives are already witnessing an increase in direct deals with cable manufacturers as well as other such consumers to secure supply at an affordable price, per the FT report. If this is a means to circumvent supply shortages, more direct deals could increase.
“Ultimately those that will be utilising the copper — whether that is for charging stations, grid buildout or vehicles — will start to get more interested in how they access this copper,” said Jonathan Price, chief executive of Teck Resources, a Canadian copper and zinc producer. “We will start to see more interest in direct linkages between the miners and those ultimate end users — we are starting to see and hear more of that.”
Long-Term Trend Is Bullish
Investors looking to add copper as a portfolio diversifier can do so with exposure to miners, which can track the metal’s spot prices closely. As opposed to overconcentrating in individual stocks, they can look to funds like the Sprott Copper Miners ETF (COPP ).
COPP seeks to provide investment results that correspond generally to the total return performance of the Nasdaq Sprott Copper Miners Index (NSCOPP). It is designed to track the performance of a selection of global securities in the industry, including producers, developers, and explorers. COPP provides blanket exposure to the copper mining industry, focusing on large, mid, and small-cap mining companies for market cap diversification.
In addition to the aforementioned supply disruptions, other bullish factors can contribute to copper’s upward momentum. Given the recent retreat in prices, it offers long-term investors and short-term traders an area of value.
“Despite the short-term consolidation, the overall trend for copper remains upward and several factors contribute to a bullish outlook,” a Sprott Critical Minerals Monthly report said. “Chinese smelters are cutting production due to plummeting treatment costs. Additionally, the U.S. and UK have sanctioned Russian copper, fragmenting global supply. BHP’s bid to acquire Anglo American has ignited investor interest, highlighting potential mergers and acquisitions (M&A) activity that may suggest the industry continues to prefer buying existing assets over developing new ones.”
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