5 Notable Copper-Related Stocks for Investment! What is the Relationship Between Copper Stocks and Copper Prices? Is it a Buy Again This Year?

In recent years, copper prices and copper-related stocks have surged. The stock price of Freeport-McMoRan(FCX), a major international copper-related company, has risen by 30% in just a month and a half. International copper prices have also increased by 17% in the past two months. This article will introduce and analyze the basic situation and future prospects of copper-related stocks for investors in 2024.

What are the factors influencing copper-related stocks? What is the relationship between copper stocks and copper prices?

The copper industry chain includes upstream to downstream activities, primarily consisting of copper mining, copper refining, copper processing, and the final applications of copper.

Generally, when investors refer to copper-related stocks, they mainly mean companies that own copper mining resources in the upstream. Among them, the largest and most famous is Freeport-McMoRan ( FCX ).

Since the main products of the copper mining company are copper ore and electrolytic copper, fluctuations in copper prices directly affect the performance of copper-related stocks.

Based on this logic, comparing the trend of the copper-related stock ETF ( COPX ) with the trend of copper prices, it is clear that the fluctuations in stock prices and copper prices are almost synchronous.

From this graph, it is easy to understand that the rise in copper prices has significantly improved the profits of copper-related stocks, and as a result, the stock prices of copper-related stocks have begun to surge.

Copper Industry Chain and Upstream and Downstream Copper-Related Stocks

Before analyzing copper-related stocks, it is important to understand the copper industry chain. The sensitivity to copper prices and the direction of influence are completely different between upstream and downstream companies in the copper sector. Only by being well-versed in the copper industry chain can one appropriately position each copper-related stock and company.

The copper industry chain mainly consists of upstream mining and beneficiation, midstream smelting, and downstream processing and application.

As you approach upstream, the concentration of the industry increases, and the number of companies decreases, so competition is not that fierce. As you approach downstream, the number of companies increases, and competition also becomes intense.

upstream copper-related stocks

Generally, upstream copper-related stocks have a positive correlation with copper prices. Since copper is a major product, an increase in product prices naturally brings substantial profits to these companies. Because the concentration of the upstream industry is higher than that of the midstream and downstream, upstream companies are more likely to gain a larger share of profits. The international copper-related stocks that this article focuses on are mainly concentrated in these upstream copper mining stocks.

midstream copper-related stocks

Middlestream refining companies include Gate Refinery, Birla Copper, Codelco Norte, Hamburg, Norilsk, Jinchuan, etc.

In the refining stage, the primary focus is on refining copper from copper ore, thus becoming a passive receiver of copper ore prices and only earning the refining fees. As a result, fluctuations in copper prices do not significantly impact their performance.

When investing in this type of company, the revenue level is typically measured using the treatment charge (TC). A high treatment charge indicates that the refining company's earnings are good, while a low treatment charge signifies weak earnings. Currently, it is in the latter weak state.

Therefore, if investors wish to invest in copper-related stocks, investing in midstream refining stages is not recommended due to their actual weak profitability. At the point when processing fees improve in the future, it will be a positive factor for midstream refining companies.

downstream copper-related stocks

On the other hand, downstream companies of copper are the opposite, as copper often becomes a cost factor. This means that the rise in copper prices erodes their profits and increases the burden on companies. Downstream processing of copper mainly includes products such as copper wire, cables, and copper foil, which are ultimately applied in fields such as power, electrical equipment, and transportation.

Japanese copper-related stocks are mainly focused on downstream processing and applications, with examples of Japanese companies including Furukawa Electric Co., Sumitomo Electric Industries, and Mitsubishi Materials.

Analysis of Copper Prices and Copper-Related Stocks Market Trends in 2024

Copper-related stocks showed a significant rise throughout 2024, demonstrating excellent performance. The outlook for 2024 remains relatively positive.

The main reasons are as follows:

1. On the supply side, capital expenditures on global copper mines have been sluggish over the past decade, resulting in low growth in copper mine production capacity.

2. On the demand side, under the carbon neutral targets, the demand for electricity and the grid is also maintaining a high growth rate, so the economic outlook for the copper industry chain is relatively good.

3. Currently, the world economy is at a stage of transformation, and global AI is significantly increasing the demand for computing power. Investing in computing power requires a large amount of electricity and cables, and therefore there is an incremental demand for copper.

The increase in copper supply in 2024 is still expected to be relatively limited, but demand is anticipated to maintain growth, suggesting that copper-related stocks will continue to present investment opportunities.

Three Major International Copper-Related Stocks to Watch

We recommend paying attention to the following three major international copper-related stocks:

Major international copper-related stock 1: Freeport-McMoRan (FCX.N)

Freeport-McMoRan is engaged in the mining of copper, gold, and molybdenum. The company was founded on November 10, 1987, by James R. Moffett, and its headquarters is located in Phoenix, Arizona. In terms of scale and the proportion of copper-related business, the company can be considered a relatively pure copper-related stock.

This stock is undoubtedly a major player in international copper-related stocks.

International copper-related stocks major 2: Glencore

It is a company engaged in the production and sale of metals, minerals, energy, and agricultural products. The company's operations cover steel, power generation, oil, metal mining, and trading. Established in 1974, its headquarters is located in Baar, Switzerland.

Glencore is not a pure copper company, but it is similarly benefiting from the current rise in mineral resources overall.

Major international copper-related stocks 3: BHP (BHP Billiton)

BHP Group Limited is engaged in the exploration, development, production, and processing of iron ore, coking coal, and copper, with major products including copper, iron ore, coal, silver, lead, zinc, molybdenum, uranium, and gold. The company was established on August 13, 1885, and is headquartered in Melbourne, Australia.

BHP has large iron ore and coal operations in addition to copper, so from the perspective of its copper business, it is not as pure as Freeport-McMoRan.

Two Notable Japanese Copper-Related Stocks

We recommend paying attention to the following two Japanese copper-related stocks:

Japan's copper-related stock 1: Furukawa Electric Co., Ltd. (5801)

Furukawa Electric Co., Ltd. was established in 1884 and was listed on the Tokyo Stock Exchange in 1949. The company manufactures copper wires and cables, optical fibers, electronic components, and more. It is positioned downstream in the copper industry chain.

Japanese copper-related stocks 2: Sumitomo Electric Industries (5802)

Sumitomo Electric Industries, Ltd. was established in 1897 and is engaged in the manufacturing of electric wires and cables, automotive wire harnesses, optical fibers, and more. It is also positioned downstream in the copper industry chain.

Future Outlook for Copper-Related Stocks: Is It Still Buyable This Year?

In the short term, both copper prices and copper-related stocks need to pay attention to short-term risks due to the necessity of adjustment after a rapid surge.

In the medium to long term, due to the favorable supply-demand balance of copper, investments in carbon neutrality and global AI computing power are expected to bring relatively rapid growth in demand, so the future trend of copper-related stocks is generally considered to be a rise.

Considering that the current copper prices and the short-term rise of many copper-related stocks are already quite significant, it would be advisable to wait for a correction and combine it with technical signals to re-enter.

How to Invest in Copper-Related Stocks?

The stocks mentioned above can be traded in the US and Japanese stock markets, making them very convenient.

In addition, when choosing a securities company, it is necessary to consider not only the platform's capabilities and legality but also the convenience of deposits, the types of investment products, the fluency of platform operations, the availability of Japanese support, and the provision of convenient CFD (Contract for Difference) investment tools.

Here are some common investment methods I recommend: direct investment in individual stocks, investment in copper-related stock ETFs, and investment in copper futures or CFDs.

Among them, CFD tools significantly improve investment efficiency and allow for a wider selection of stocks. For example, as a result of the analysis, it was found that there is a quite strong correlation between copper-related stocks and copper prices. Therefore, if you want to invest in copper-related stocks while also including copper as a commodity in your investment portfolio, there is no need to open multiple accounts, as CFDs often provide services to trade both stocks and copper as a raw material within a single account.

Advantages and Risks of Investing in Copper-Related Stocks

Copper prices are showing a strong rise trend in the short term, and the supply-demand balance is expected to be favorable in the future. However, it is still a commodity that is influenced by the economic cycles of the global economy.

The advantage of investing in copper-related stocks is that for investors, if they can grasp the economic cycles of the global economy, they can also identify investment opportunities in copper-related stocks. Both copper prices and stock prices reflect the economic cycle well and are difficult to manipulate.

However, if Gate continues to raise interest rates in 2024, it could suppress global demand and negatively impact copper as well. In this case, the stock prices of copper-related stocks may also decline.

Therefore, when investing in copper-related stocks, it is crucial to pay close attention to the global economic cycle, hold positions during the rise cycle, and be mindful of risks when signs of an economic downturn appear.

Summary

This article introduced the factors affecting the copper industry chain, copper prices, and copper-related stocks. Based on the analysis of the supply and demand balance of copper, three international copper-related stocks and two Japanese copper-related stocks were presented. These are positioned respectively in the upstream mining and beneficiation, midstream refining, and downstream processing and application of the copper industry.

In investing, it is a good strategy to pay attention to the global economic cycle and hold positions during the rise. As for the risks, if Gate continues to raise interest rates this year, there may be pressure on copper prices and copper-related stocks.

Frequently Asked Questions

Which stocks benefit from the decline in copper prices?

If copper prices decline, it could lower costs for companies that purchase copper to produce downstream copper pipes and copper foil, potentially improving profits for these stocks. Furthermore, for appliance manufacturing companies that use a lot of copper, the decline in the price of copper, which is a raw material, could lead to a decrease in production costs.