Copper, the world’s third most used metal, has been pivotal throughout history, helping to transition civilisation from the Stone Age. Today, it is a key player in the energy transition. This year, copper prices have surged by 20%. The growing demand for this red metal is evident from BHP’s recent £38.6bn bid for Anglo American, although it was ultimately aborted. Hedge fund manager Pierre Andurand predicts that prices could nearly quadruple to $40,000 a tonne in the coming years.
The rising value of copper is not just seen in the markets. In southern England, copper cable theft has increased by 20% over the past year, according to the Hampshire and Isle of Wight police. Copper’s extensive use in power grids, factories, and solar panels makes it a good indicator of economic growth, earning it the nickname “Dr Copper.” With the push towards a greener economy, the demand for copper is expected to nearly double by 2035, as forecasted by S&P Global Commodity Insights. Electric vehicles, for example, use four times as much copper as traditional vehicles.
Retail investors who are optimistic about copper’s prospects have several ways to get involved. One approach is to follow BHP’s example on a smaller scale by purchasing shares in mining companies. While Chile’s Codelco is state-owned, other major miners are publicly listed. These include BHP in Australia, Freeport-McMoRan and Southern Copper in the US, and Antofagasta and Glencore in the UK. Canadian-based Teck Resources and China’s Zijin Mining are also significant players in the copper market.
Given the controversies that can surround mining companies, diversifying investments is wise. Several UK-compliant ETFs offer a way to invest in a collection of copper miners. For those who prefer not to invest directly in mining companies, there are other options. One can buy physical copper, similar to purchasing gold ingots. However, this is not practical for most retail investors. For example, the lot sizes on the LME are 25 tonnes, costing approximately $275,000, and would require considerable storage space.
Investing in exchange-traded commodities (ETCs) that focus on physical copper has lost popularity due to high costs related to storage, security, and insurance. Instead, funds that invest in futures contracts, like those from WisdomTree, are a better alternative. These funds incorporate storage fees into their prices, typically resulting in an upwards curve in a rising market. However, the current CME futures curve is in backwardation, meaning further out contracts are cheaper.
For those looking to amplify their returns, leveraged funds are an option, offering two or three times the returns of the benchmark index. Conversely, bearish investors can opt to go short through similar funds. Regardless of the strategy, copper presents opportunities not just for institutional investors but also for retail investors looking to capitalise on its promising future.
Jubilee Metals Group plc (LON:JLP) is a diversified metal recovery business with a world-class portfolio of projects in South Africa and Zambia. The Company’s expanding multi-project portfolio across South Africa and Zambia provides exposure to a broad commodity basket including Platinum Group Metals, chrome, lead, zinc, vanadium, copper and cobalt.
