Copper is a tertiary commodity, coming in third to the shinier appeal of gold and silver. However, the use of copper permeates almost every aspect of modern society – from consumer goods and automobiles to utilities and construction. Today, copper is the third most used metal across the globe and plays a pivotal role in all major economies and in the developing world.
If you are looking for a hedge against inflation, it is common to consider investing in gold or silver. But another way to diversify your portfolio is including the best copper mining stocks in it.
Here are five reasons to invest in copper stocks.
The demand for copper is high
Copper is the most useful industrial metal on the planet. Its use spans multiple applications and sectors, including industrial wiring, computer components, mobile technologies, the automotive industry, and new home and commercial construction, to name a few.
Most of these industries perform extremely well in economically stable periods and relatively well during times of turbulence or recession. For this reason, an investment in copper is actually an investment in growth.
Use will likely increase in the coming years
Until now, copper prices have remained somewhat contingent on trade talks between China and the United States. Growing optimism about a possible deal has recently boosted demand and pricing.
China is the world’s biggest consumer of copper, accounting for over 40% of global demand. The United States and the European Union follow, and India has emerged as the fourth largest global consumer of copper.
China had stockpiled huge stores of refined copper and contributed to a decrease in their demand. As the country is starting to leave the economic slowdown caused by the coronavirus pandemic, it continues to move towards urbanization, a long-run strategy that will take several decades to complete. This is a positive indicator for increased copper demand.
On the other hand, with India’s population expected to surpass China by 2025, the country’s continuous efforts towards improving its current infrastructure and a push towards economic growth will have a positive impact on pushing copper prices higher.
Production occurs in politically stable regions
The majority of copper production is centered in South America. Chile, at 5.6 million MT, is the world’s largest copper mine. The country produces more than double the amount of the next highest producer, Peru, at 2.4 million MT. Chile’s mining company Codelco is the top copper-producing company. Unfortunately, because it is state owned, it is not available to investors. Chile also has the highest copper reserves at 200 million MT.
There are many major and mid-tier copper producers to choose from
The largest copper miners with the best copper mining stocks are Freeport-McMoRan (NYSE:FCX) and Glencore (LSE:GLEN,OTC Pink:GLCNF). They produced 3.247 million pounds and 1.371 million MT of copper supply in 2019, respectively.
Another strong contender for the best copper stocks to buy is BHP Billiton, which produces more than 1 million MT per year of mined copper (ASX:BHP,NYSE:BHP,LSE:BLT). The company delivered over 1.689 million MT in 2019.
Other key players in the world’s copper market that own or operate copper mines or copper deposits include Southern Copper (NYSE:SCCO), Rio Tinto (LSE:RIO,NYSE:RIO,ASX:RIO) and Anglo American (LSE:AAL,OTCQX:AAUKF).
If you want to buy copper stocks that have potential, these are the ones to go for.
Copper prices are low
The past few years have seen copper prices drop to an all-time low, and only recently they started to rebound.
As global demand shows strong signs of ramping up quickly, and current levels of supply are diminishing, the time could not be better for investors who are looking for a sound, long-term investment into growth.
Copper shows every sign of a commodity that is worth having in your portfolio, as it is not prone to significant fluctuations in the price but offers the possibility for long-term increase in value.
Being used across many industries with hundreds of applications, it is safe to say that demand for copper will only drive the price up in the coming years. This presents a good opportunity if you want to invest in copper stocks to enter now when the price is still relatively low.
Finally, it is important to understand that copper is different from gold and silver. Purchasing copper bullion is not convenient for investors, as to invest in bullion with any scale, you will require significant space for storage. A much better solution is to buy copper stocks.
This post was written by Rex Rocks on behalf of Hot Chili Ltd., an Australia based copper mining company with three exciting projects located in Chile. You can follow Hot Chili Ltd. on LinkedIn.