Referring to copper as the new oil is a bit ironic considering it plays such an important role in green technology, especially electric vehicles (EVs).
Yet, the rise in copper demand and record-high prices has investors asking themselves if it’s the right time to invest.
Outside of EVs and green technology, copper can be found in plumbing, electronics, and more.
Copper’s versatility has been well known in the investment community, but until recently, most people ignored copper for other metals such as gold or silver.
As a cheap metal, you would have a hard time finding ways to make significant gains on copper stocks just a few years ago.
Now, a copper investment could be a game-changer for your portfolio.
Of course, just like most investments, there are risks associated with copper stocks. So, should you invest in copper stocks in 2021?
We’re nine months into 2021 and the copper forecast for 2021 has seen record highs.
Q1 of 2021 saw copper stocks riding on the hopes of effective vaccines bringing industries back.
In Q2 of 2021, copper managed to nearly reach $11,000, a record high. Although it didn’t finish at a record high, it remained at a respectable $9,382.
This trend of high copper prices is expected to continue throughout the remainder of 2021 and into 2022.
The primary driving force behind demand and prices remaining high is new construction projects and the push to move on from gas-powered cars and into the future with EVs.
No matter how you feel about climate change, one thing is abundantly clear—The world is moving on from conventional fossil fuel vehicles.
While the average consumer is likely to continue using and buying gas-powered vehicles, governments around the world are putting in policies to cycle out gas guzzlers.
So how does copper factor into all of this? Consider that EVs will require 80% more copper than standard vehicles.
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The red metal is a key component to constructing EV batteries and parts, including the AC system, wiring, and more.
It’s the reason many experts have been saying there’s no green revolution without copper.
Although being a copper investor in May of this year would have been ideal, it’s not a bad idea to invest now.
In May, copper reached a peak point and has not since returned. However, many believe copper's record run may continue into next year and beyond.
Copper demand remains strong as we move through the end of Q3 2021. But can the supply keep up?
Recently, China made efforts to release reserves of metals, including copper. The move was partially responsible for bringing copper prices down from record highs.
Yet, demand is so strong for copper that industry experts believe it can reach record highs again.
Even if it doesn’t hit a new high, copper demand will remain high for years to come as new projects and EVs are constructed.
With copper demand continuously soaring and supply shortages quickly becoming a reality, there’s speculation that copper could reach $15,000 by 2025.
In the past year alone, copper demand has gone up by about 80%. However, the copper supply has not risen to meet demand.
The result? Climbing prices.
So what’s the problem? Well, it’s not that the world is running out of copper, despite what you may have heard or read.
The Earth has plenty of copper to go around. But mining for that copper is not easy.
The COVID-19 pandemic shut down countless mining operations and it’s been difficult to find new sources of the red metal that can keep up with market demand.
Even China’s efforts to add more supply did not appease the world's appetite for copper nor will it keep the price down much longer.
As alluded to above, the earth still maintains a great deal of unminded copper—it’s just not always easy to get to.
It would be great if copper reserves could just be in areas that are favorable to mining, but that’s rarely the case.
There are several factors that major mining companies take into consideration before starting a new project.
Locations (geology), jurisdiction, and other risks must be considered before mining can begin.
After all, if a mining company were to begin a project just to find out they must shut down to comply with local regulations could put them in the red.
So it's both surprising and not surprising that there’s been some hesitation by the big copper companies to start new projects.
You would think that they would be looking for any opportunity to increase their supply they could potentially cash in on.
On the other hand, the risks of not meeting demand or having to halt mining might be too great for some.
As copper’s price and demand swell, who are the companies that will benefit the most?
Glencore (OTC: GLNCY) shareholders of Glencore have already seen $2.8 billion returned, and the year isn’t finished just yet. However, due to a significant drop in supply, Glencore’s market share is only expected to rise at a single percentage point.
Freeport is an American mining company that is looking to seize the opportunity in the copper market. They are expected to move up in market share by 2.5% by 2030. This could be a great opportunity for a smart investor, such as yourself.
Ready to start investing? Let’s take a look at how to invest in copper.
The copper market is known for its volatility, and right now, it’s known for its soaring price and demand.
One of the easiest ways to gain exposure to the red metal market is to invest in copper stocks.
These are shared in a company that mines metals, sometimes primarily focusing on copper.
The two companies in the above section are examples of mining companies you could invest in, but they are certainly not the only ones.
With a quick google search you could find any number of companies mining for metals, so how should you choose?
Look for strong balance sheets with low debt. You want to invest in a company that invests in itself, meaning they are making efforts to improve their technology and therefore lower costs.
Your other option could be copper exchange-traded funds or ETFs.
Where copper stocks demand a lot more attention and research, ETFs can be handled passively.
That isn’t to say that you won’t need to do anything at all, but you play a less active role with ETFs.
An ETF can be traded just like a stock, but instead of tracking a single company, an ETF can track a sector, commodity, or asset.
To invest in a copper ETF would mean that the ETF is tracking the price of copper.
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