Top Copper Stocks to Buy in Q3 2021
What do electric cars, the plumbing found in your home, and Biden’s $2 Trillion Infrastructure Plan all have in common?
They all rely on copper.
That’s right, the red metal is a hot commodity, and will be the key to the green revolution.
How can you turn the recent spike in demand to your advantage? What should you look for when entering the copper market?
Let’s take a look at copper stock’s performance in q3 2021 and some of the top copper stocks to buy right now.
Copper Forecast 2021
If you’re unfamiliar with the copper market, over the past couple of years the price of copper has gone from trading under $3 per pound in March 2020 to reaching record highs of more than $4 per pound this past May.
But is this most recent surge sustainable, or can we expect to see a significant drop?
The answer isn’t simple.
First, let’s look at what happened in 2020. Obviously the market hit a rough patch as COVID-19 shut down mining projects across the globe.
But as economies started to reopen, the demand for the versatile red metal swelled. So much so that now the supply is dwindling while demand stays high.
Who’s Causing the Supply Shortage? The US and China.
The Biden administration has put forth a large infrastructure bill for EVs, new construction, and more. Achieving this plan will require a tremendous amount of copper.
Similarly, China, the world’s top consumer of copper and the second-largest producer, has gobbled up much of the remaining supply.
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The Largest Producer of Copper
While China is the world’s third largest producer of copper, Chile remains the world’s largest copper producer, followed by Peru. As you can imagine, with recent demand spikes, Chilean mining firms are ecstatic.
But they are not alone, and here’s where things get dicey. Chilean labor unions also want a piece of the copper pie, threatening any plans to keep costs low.
With a new bargaining chip, labor unions in Chile could drive up goods and service costs. If certain demands or working conditions changes aren’t made, there could be significant periods of stoppage.
On top of that, some economists worry the current trend around copper is a supercycle.
In a supercycle, the demand for a commodity (copper in this case) booms, driving up prices. When prices spike too high, this collapses demand and sends prices back to more sustainable levels.
While it certainly sounds like we’re looking at a boom in demand, it’s not quite time to call it a supercycle. Instead, your time is better spent monitoring supply and analyzing mining companies’ balance sheets.
Supplies Are Low as Demand Increases
To fuel new projects and green initiatives, countries will need to get their hands on plenty of copper.
For example, to construct 1000 EV batteries, you’d need about 83 metric tonnes (MT) of copper. To construct the same amount of gas-powered cars, you’d need 23 MT of copper.
China has already made efforts to dominate the EV market, while the US and EU nations take steps to end the sale of conventional gas-powered internal combustion engine (ICE) cars.
With all roads pointing to copper, it’s no wonder experts warn of a major supply shortage on the horizon.
Is Copper a Good Investment?
Supply shortages, supercycle fears, labor union woes. These all seem like good reasons not to invest, right?
Not for smart investors.
There is still time to cash in on copper’s wave, but you’ll need to act quickly and do your homework to reap the maximum benefits.
From what you now know, copper’s price is at a higher price than a year ago.
And, barring no setbacks to world economies, demand for more copper to achieve infrastructure and green plans will keep that price high.
You could argue that right now is the best time to invest in copper. So let’s take a look at your options.
How To Invest in Copper
Looking for an easy way to gain copper market exposure and add some diversification to your portfolio? Try Investing in copper mining stocks and copper ETFs. Here’s a breakdown of how to invest in copper.
What To Know About Copper Mining Stocks
Copper mining stocks are shares in a mining company. Some mining companies focus their attention on specific minerals or metals, like copper.
Other mining companies mine and sell a variety of minerals and metals, depending on what they find.
Your benefit here is that if the company you choose doesn’t find much copper or whatever they were mainly looking for, it can still sell the other mined goods to keep itself afloat.
However, when copper is in such high demand, you’ll undoubtedly find yourself looking for a mining company focused on the red metal.
Regardless, the first thing you should do is research that company. Look for companies that invest in newer technology, focus on efficiency, and have low debt levels.
Another key factor for mining companies is location. Where in the world are they mining? Do local conditions or government regulations favor mining? Is the country politically and economically stable?
What To Know About Copper ETFs
Another great option for an easy introduction into the copper mining industry is an exchange-traded fund, or ETF.
Unlike mining stocks, ETFs track an index, commodity, or bond rather than a single company. Although there are some small copper ETFs, you’ll find more ETFs focused on the mining industry.
Since your ETF is not a direct investment into one company, you’re shielded from risks associated with individual mining stocks, such as the company going under.
However, that doesn’t mean there are no risks associated with copper ETFs. The trouble with tracking a commodity, such as copper, is that there’s no way to tell for certain what prices will do in the long-term..
During the global recession of 2008, copper peaked near $4 before crashing back to less than $2 by 2009.. Now, after copper prices peaked in May of 2021, we find ourselves potentially coming off another copper high-point. That said, if demand continues to grow as it has, while supply continues to wane, copper prices could go even higher.
Safe to say, an ETF investment is not for someone who plans to “time the market.”
Top Copper Stocks to Watch in Q3 2021
Ready to start investing in copper stocks? Then it’s time to do some research. Let’s take a look at three copper stocks to buy in Q3 2021.
- Vale (NYSE: VALE)
As one of Brazil’s largest metal mining companies, Vale (NYSE: VALE) has had quite the year, returning over 109% to investors. Although it focused its operations on other metals like iron ore, it managed to mine 360,000 MT of copper. Recently, the company was forced to halt production over fears of a nearby dam collapsing. Vale ensures that the dam is safe..
- Glencore (OTC: GLNCY)
Another company that enjoyed the recent surge in copper prices is Glencore (OTC: GLNCY). Shareholders of Glencore will see $2.8 billion returned, and we’re only halfway through the year. Of course, this recent surge is in large part due to recovery efforts. As long as recovery efforts continue and supply chains hold up, shareholders could expect even more by year’s end. But Glencore, much like all mining companies, is prone to labor setbacks due to Covid.
- Southern Copper (NYSE: SCCO)
If you’re looking to invest in a giant in the copper industry, Southern Copper (NYSE: SCCO) might be the one. Southern Copper is an example of a mining company that focuses much of its efforts on mining copper. In fact, 80% of their total sales have been copper products. Their 2019 haul of copper was around 993,822 tons, and their shareholders received a 64% return on their investment over the past year.
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