The recent fluctuations in copper prices over the past few months are indeed quite interesting. Initially, driven by expectations of expansion in AI data centers and upgrades in power infrastructure, copper prices soared to new highs, but as speculative capital took profits and the US dollar appreciated, prices experienced sharp volatility. Watching copper concept stocks also fluctuate accordingly, I started to ponder the relationship between copper stocks and copper prices.

Actually, the logic is quite simple. The copper industry chain—from upstream mining, midstream smelting, to downstream processing—each link's sensitivity to copper prices varies completely. Upstream miners like Freeport-McMoRan (FCX) and Rio Tinto (RIO) produce copper as their main product; when copper prices rise, their profits increase, and when prices fall, profits decrease. These companies are generally positively correlated with copper prices.

But midstream smelting plants are different. They just smelt ore into refined copper, earning smelting fees, so fluctuations in copper prices have little impact on them. Downstream processing companies are even more interesting; for them, copper is a cost. When copper prices rise, their profits can actually be squeezed. Therefore, when investing in copper stocks, it’s important to understand which part of the industry chain the company belongs to.

Globally, I favor three major players. First is FCX, which has the most pure business model, with profits highly positively correlated with copper prices. Their domestic US mines benefit directly from US government subsidies, and their large Indonesian mines are also ramping up production. Second is Glencore, although not a pure copper company, as the world’s largest commodity trader, they control copper, cobalt, nickel, and other minerals, providing a more stable profit mix. The third is BHP, which controls the world’s largest Escondida copper mine, with a clear cost advantage, and they have also raised their production guidance this year.

In Taiwan stocks, First Copper is the largest copper foil processing plant in Taiwan, and fluctuations in copper prices have the most direct impact on them. Recently, with copper prices high, their low-cost inventory on hand has turned into a huge gross profit margin, potentially leading to explosive quarterly EPS growth. Huachung, on the other hand, has an advantage in stable orders driven by power grid upgrades, with on-hand orders exceeding NT$8 billion, and capacity nearly fully utilized. As Taiwan’s AI data centers commence construction, the demand for power transmission systems will only increase.

Regarding investment timing, I think it’s okay to buy, but it’s important to choose the right targets and avoid overly heated periods. Although the long-term trend looks promising, short-term caution is necessary. The rally in January was already significant, and market sentiment is somewhat overheated. Going forward, focus on corporate earnings reports—see if processing plants can effectively pass on costs, and whether miners will again raise their capacity guidance.

Overall, the investment logic for copper stocks is clear, but the key is to understand each company's position in the industry chain. During periods of global economic expansion, actively position yourself; once signs of recession appear, stay alert. This wave of structural copper prosperity is indeed supported by fundamentals, but short-term fluctuations should not be underestimated.