Copper: The Case for copper and the ETFs and stocks that will rise and fall with the red metal

For many years, Doctor Copper diagnosed the health and well-being of the global economy because of its role in infrastructure building. Many economists watch the copper price as an indicator of global economic growth or contraction. 

Over the past years, the red nonferrous metal has assumed a new and crucial role. In 2022, Goldman Sachs analysts bestowed upon copper the title of the "new oil" due to its pivotal role in the fight against climate change. Copper's importance in electric vehicles, wind turbines, and other green energy initiatives cannot be overstated. 

Copper's price rose to a record high of over $5 per pound in March 2022, but it ran out of upside steam. Four months later, in July 2022, the price of nearby COMEX futures fell by over 37% to $3.15, when it formed a significant bottom. 

With copper futures currently standing at over $4 per pound in early April, there is a strong possibility that they could be gearing up for a significant challenge of the 2022 high in the upcoming weeks and months. 

The copper bull market began over two decades ago

• Before 2025, COMEX copper futures never traded over $1.61 per pound.
• Copper has not traded under $1 per pound since 2003.
• The red nonferrous metal has not been below $2 per pound since 2016 or below $3 since 2020.
• Copper reached a record high in 2022 at $5.01 per pound.
• Copper is the leading base metal on the London Metals Exchange. Aluminum, nickel, lead, zinc, and tin prices tend to follow copper higher and lower.

China is the world’s leading copper consumer

• China consumes over half the world’s annual refined copper production.
• Copper prices and inventories reflect the health and well-being of the Chinese economy.
• Weakness in the Chinese economy weighed on copper, sending the price below $4 per pound in the second half of 2022 and throughout most of 2023.

The factors supporting higher copper prices

• Worldwide copper demand is rising as countries address climate change. Electric vehicles, wind turbines, and other green energy initiatives require increasing amounts of copper.
• Copper supplies have not kept pace with the rising demand.
• LME copper inventories fell to the 112,475 metric ton level as of the end of March 2024.
• It takes the better part of a decade to bring new production online. Many new mining projects are in challenging countries like the Democratic Republic of Congo.
• Copper found a significant bottom in July 2022 and has been trending higher since trading at the $3.15 per pound level.

Buying on corrections has been the optimal approach

• Copper’s bull market began over two decades ago.
• The most aggressive long-term bullish trends rarely move in straight lines.
• Since the turn of this century, buying copper on corrections has been the optimal approach to investing and trading the nonferrous metal.

Copper ETF products and producers that track the metal’s price

• The U.S. Copper ETF product (CPER) tracks copper’s price.
• The Invesco DB Base Metals Fund (DBB) holds long positions in copper, aluminum, and zinc, the most liquid base metals.
• Southern Copper (SCO) and Freeport McMoRan (FCX) are leading copper producers.
• BHP Billiton (BHP), Rio Tinto (RIO), and Glencore (GLNCY) are diversified mining companies that own significant copper mining properties.
• The iShares Global Select Metals and Mining Fund (PICK) owns the leading copper and base metals producing companies.

Copper is a leading bellwether commodity that reflects economic growth or contraction. The odds favor higher prices as production is struggling to keep pace with the rising demand, and green energy initiatives have added a new demand vertical, causing a fundamental deficit.

Thanks for reading, and stay tuned for the next edition of the Tradier Rundown!