Are these the best copper stocks and ETFs to watch?

After a difficult 2020, things are looking up for the copper industry. Explore copper stocks and ETFs and learn how to trade in copper shares and ETFs with us.

Copper stocks and ETFs: what you need to know about the industry

When we talk about the copper industry, we mean the sector that mines and refines the commodity. More than just a shiny metal, copper is used in a number of activities. These include construction, manufacturing of electronics, transportation and more.

Copper is mined from pits in its raw form (copper ore) before being crushed, roasted and smelted. It’s then turned into its various known forms, including copper wiring, piping, circuitry and even consumer goods like house fittings and jewellery.

The copper industry is dominated by several key players, such as Corporación Nacional del Cobre of Chile (the country with the most copper reserves on the planet), Freeport-McMoRan, BHP, Southern Copper and Glencore.

According to BHP, demand for copper will likely double in the next 30 years.1 Although copper prices took a dive in early 2021, due to temporary production slowdown in Europe and China, they have by and large climbed since 2020, when Covid-19 pandemic disruptions to mining temporarily lowered the copper price.

How to trade in copper shares and ETFs

If you want broad exposure to the copper industry through a number of stocks, you could consider copper ETFs. With ETFs, you can invest in a range of copper-related companies, or trade the copper industry generally, with a single position.

If you want to speculate on the price of copper directly, not through copper mining stocks for instance, you can do so through derivative trading products like CFDs. With CFDs, you can trade on either the current copper spot price or on copper futures, which means you’ll speculate on the price of copper on a predetermined date to come. You’ll make a profit if you predict the copper price correctly and a loss if you don’t.

It’s also worth noting that CFDs are leveraged forms of trading. This means you’ll put down a small initial deposit (called margin) to open a larger position. However, because profits and losses are calculated on your full position size and not your margin amount, these can outweigh your deposit significantly.

How to trade in copper

  1. Decide whether you want exposure to a single stock or copper ETF
  2. Create an account or log in
  3. Trade using CFDs
  4. Take steps to manage your risk
  5. Open and monitor your position

Learn everything you need to know about trading in copper

Decide whether you want exposure to a single copper stock or copper ETF

Trading copper stocks means you’ll speculate on the share price of companies linked to copper in some way, for instance mining companies like the ones listed above.

If you want a broader exposure to copper, you’d trade in an ETF. This gives you access to a basket of different copper industry companies’ shares which aren’t actively picked by you.

Create an account or log in

You can open a CFD trading account with us in just three steps:

  1. Fill in a form: we’ll ask about your trading knowledge to ensure you get the best experience
  2. Get verification: we can usually verify your identity immediately
  3. Fund and start trading: you can make a deposit or withdraw your money whenever you like

Trade using CFDs

With us, you can take a position on copper using trading, speculating on the price of copper, copper stocks or copper indices without owning any copper shares.

Trading can be done via CFDs. With CFDs, you’ll earn or lose the difference between your chosen market’s starting price when you opened the position and it’s price when your position was closed.

Open your position and manage your risk

Once you’ve created and funded your trading account, you can start trading copper with us.

First, go to the trading platform and choose whether you want to buy or sell your chosen copper stock or ETF. You’d click ‘buy’ if you expected the stock or ETF to rise in price, and ‘sell’ if you expect it to fall.

Then, you’ll set your stops and limits before opening a position, which will help to potentially prevent losses you aren’t comfortable with and lock in possible profits.

Lastly, you’ll click ‘place deal’ to open your trade, after which you’ll be able to monitor and close your position.

Best copper shares to watch

  1. BHP
  2. Glencore
  3. Rio Tinto
  4. Southern Copper
  5. Freeport-McMoRan

Note that these stocks have not been chosen as the largest copper miners and producers in the world alone, but rather based on various factors including market cap, future growth prospects, dividends and latest results. This list was last updated on 13 September 2021.

BHP

With operations in Australia, Chile and a proposed mine in the United States, BHP is the world’s largest metal mining company and among the biggest commodity producers. Its main outputs include copper, iron ore, nickel, petroleum and coal. The miner has a rich history, which dates all the way back to the late 1800s.

BHP produced 1.7 million tonnes of copper in 2020.1 In 2020, the company’s copper production was around 1.72 kilotonnes, which plateaued slightly in 2021 to around 1.63 kilotonnes, caused by a change in the copper grade. Nevertheless, BHP almost doubled its operations profit in 2021, making almost $26 billion in 2021, versus the $14.4 billion made in 2020.2

BHP also frequently gives out respectable dividends. Its latest, a final 2021 dividend of $2 per share paid out on 30 June 2021, making BHP’s returns to shareholder over $15 billion for the full 2021 year.2

Glencore

LSE-listed Glencore is an Anglo-Swiss miner based in Switzerland, with operations in over 35 countries. The company is one of the largest producers and marketers of copper in the world, but also produces cobalt, gold, nickel, zinc, lead and other minerals.3

In 2020, Glencore produced 1.26 million tonnes of copper and sold 3.4 million tonnes of the commodity (including reserves) through its marketing business. This was in line with pre-Covid-19 pandemic 2019 production – an impressive feat considering the disruptions to mines caused by Covid-19 pandemic lockdowns in 2020, particularly in South Africa. Copper production is expected to stay relatively flat for the short term, with a guidance of 1.22 million tonnes for 2021 and no guidance released yet for 2022.4

For the first half of 2021, Glencore reported strong results, with revenue up 32% from $70.96 million in the first half of 2020 to $93.8 million in June 2021, driven largely by higher copper prices. Even more encouragingly, adjusted earnings before interest, tax, depreciation and amortisation earnings before interest, tax, depreciation and amortisation (EBITDA) was up from $4.83 billion in 2020 to $8.65 billion in 2021.5 Glencore reinstated their dividend in February 2021 and also announced in August 2021 that they would return an additional $2.8 billion to shareholders, thanks to the windfall experienced by significantly higher copper prices. This would include a special dividend of 0.4c per share.

Rio Tinto

UK-based Rio Tinto is one of the world’s biggest metals mining companies, with commodities like copper, iron ore, uranium, gold and even diamonds among its biggest outputs. Also stemming back to the 1800s, Rio Tinto is an LSE-listed company.

Copper ore production at Rio Tinto has suffered disruption due to Covid-19 pandemic, with mined copper production figures for 2021 (Q2) at 115,500 tonnes – 13% lower than Q2 2020.6 Production was also somewhat affected by an anticipated slope failure at the company’s operations in Kennecott in May 2021. However, the ore involved was largely recoverable, causing only a temporary disruption.

Rio Tinto is also part owner of the Oyu Tolgoi mine in Mongolia, set to be one of the largest copper mines in the world by 2030. The mine is still in the development process, with Rio Tinto in talks with the Mongolian government to expedite the process and get the mine up and running within 2022. Once Oyu Tolgoi is complete, it should increase Rio Tinto’s copper production levels significantly.

Rio Tinto’s overall results have showed significant rallying after the initial pandemic disruptions of 2020. Net cash generation from operating activities almost tripled in 2021, from $5.63 million in Q2 2020 to $13.66 million in Q2 2021. Underlying EBITDA rocketed from $9.64 billion in Q2 2020 to $21.03 billion in Q2 2021.7

The latest Rio Tinto dividend was generous, at $5.61 per share.7

Southern Copper

As the name suggests, Southern Copper’s main focus is the production of copper. However, it also mines by-products such as molybdenum, zinc, silver and various other metals. The Mexico-based company also has operations in Peru and, with a market cap of almost $50 billion, is considered one of the world’s largest copper miners.

Southern Copper produced 1 million tonnes of copper in 2020, which is expected to decrease slightly in 2021 to 960,000 tonnes, thanks to scheduled maintenance works and stripping to take place in 2021, which will likely mean a temporary drop in ore grades. However, both sales and value from copper sales increased, thanks to a higher copper price in 2021. As of Q2 2021, copper sales were $2.9 billion – $1.1 billion higher than Q2 2020. Although overall sales volume decreased, higher prices meant that copper value (from sales) increased 59.8% in 2021 so far.8

In terms of dividends, the latest pay-out was a quarterly cash dividend of 90c per share, which was paid on 25 August 2021.8

Freeport-McMoRan

US-based Freeport-McMoRan Copper & Gold is a world leader in both the copper and gold mining spaces. Apart from these, the company also mines molybdenum and silver and has operations in North America, South America and Indonesia.

The company’s copper production guidance for 2021 is 1.72 kilotonnes, up 18.5% from 2020 levels.9 Also, thanks to increasing output at Grasberg in Indonesia, the company said it expects copper sales to reach a record 1.70 million tonnes for the 2021 year.10 In fact, the $929 million copper sales for Q2 2021 represented a 22% increase on copper sales for Q2 2020. Largely due to this, the company boasted revenues of $5.75 billion for Q2 2021, compared to $3.05 billion in the same quarter of 2020.11

Another thing which may bode well for Freeport, despite the recent lower copper prices, is its acquisition of the Yandera Copper Project, based in the Cayman Islands. The copper-rich location could well up Freeport’s copper output even further.

Freeport’s latest dividend pay-out was a cash dividend of 0.75c per share on 2 August 2021, apart from an existing annual base dividend of 30c per share.

Best copper ETFs to watch

  1. United States Copper Index Fund
  2. GlobalX Copper Miners ETF
  3. iPath Bloomberg Copper Subindex Total Return ETN

United States Copper Index Fund

The United States Copper Index Fund, known by its ticker CPER, is an exchange traded security owned by ETF manager USCF. Dealing in copper futures contracts, the American ETF tracks the daily changes of USCF’s SummerHaven Copper Index Total Return.

CPER has over $2.7 million in assets under management (AUM) and its current estimated yield on cash holdings is approximately 0.02%, or a performance over one-year yield of more than 50%. The ETF’s total expense ratio is 1.08%.12

GlobalX Copper Miners ETF

GlobalX Copper Miners ETF, or COPX, provides exposure to copper broadly, including to top copper miners such as Glencore and Freeport. It tracks the Solactive Global Copper Miners Total Return Index.

With net assets of over $1 billion, COPX is a large ETF, with a weighted average market cap of over $16 billion. The ETF also has an expense ratio of 0.65%.

COPX has a return on equity of over 18% and a price-to-earnings ratio of over 32%.13

iPath Bloomberg Copper Subindex Total Return ETN

Barclays Capital-owned iPath runs the exchange-traded note iPath Bloomberg Copper Subindex Total Return. The ETN is, like CPER, focuses on copper futures by providing exposure to the Bloomberg Copper Subindex Total ReturnSM index.

With a market cap of over $17 million and over $88 million in AUM, the iPath Bloomberg Copper Subindex Total Return is significantly larger than CPER. Bloomberg Copper Subindex’s total return for the year to date is over 24%, with an investor fee rate of 0.75% per annum.14

Why do people trade in copper stocks and ETFs?

  • People trade copper stocks and ETFs as it’s an accessible way to gain exposure without outright ownership of the commodity
  • Copper is used extensively in many processes that keep our modern world running smoothly, from electricity generation to infrastructure. This means the demand for the metal is relatively stable
  • Because copper has so many applications, its price is considered a reliable indicator of macroeconomic health, since demand for copper will always be great when demand for infrastructure, electricity and technology is. So much so, in fact, that some economists affectionately term the metal ‘Doctor Copper’
  • Apart from macroeconomic and geopolitical factors, the copper price is also moved by what moves copper mining production figures. For instance, the copper price tumbled temporarily in 2020 after copper mines were shut down amid Covid-19 pandemic lockdowns
  • There’s also some talk of copper reserves in the earth being depleted soon – even potentially within the next 65 years.15 This fact could drive up the price of copper
  • Another thing that makes copper a commodity to watch is that it’s used in the copper-intensive process of manufacturing electric vehicles, set to grow exponentially in the future and likely to further push up the copper price

Top copper stocks and ETFs summed up

  • Two of the most popular ways to gain exposure to copper is to trade copper stocks and copper ETFs
  • Copper demand relatively stable and growing, thanks to its many applications
  • The copper industry is largely made up of copper mining companies, most notably the main players like BHP, Glencore, Southern Copper and Freeport-McMoRan
  • With us, you can trade in copper stocks and ETFs

Sources

1 BHP group, 2021
2 BHP group, 2021
3 Glencore, 2021
4 Glencore, 2021
5 Glencore, 2021
6 Rio Tinto, 2021
7 Rio Tinto, 2021
8 The Motley Fool, 2021
9 Mining Technology, 2021
10 Fastmarkets, 2021
11 Mining Technology, 2021
12 USCF Investments, 2021
13 Global X, 2021
14 iPath, 2021
15 Copper Development Association, 2001

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The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

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