ETFs
Copper Price for AI and Electric Power Hits New Highs: ETFs to Mine – May 15, 2024
Copper prices are recovering due to long-term uptrends and tight supply conditions. A short squeeze pushed copper futures to a record high and a record premium over the next few months. Notably, Comex futures for July delivery rose 4.2% during the May 15 trading session at the time of writing, to $5.08 per pound. The metal has gained more than 25% so far this year.
Investors looking to exploit the uptrend in commodities should consider US Copper Index Fund (CPER – Free report) , Global X Copper Miners ETF (COPX – Free report) , Sprott Copper Miners ETF (COPP – Free report) , iShares Copper and Metals Mining ETF (ICOP – Free report) And Sprott Junior Copper Miners ETF (COPJ – Free report) . Metals mining companies are the biggest beneficiaries of the copper price surge, as mining companies act as leverage over the prices of the underlying metals and therefore tend to make more gains than their bullion cousins in a rising metals market.
Demand/supply imbalance
Demand for copper is rising amid a rush to build data centers and continued electrification of the global economy. The red metal is integral to the manufacturing of electric vehicles, power grids and wind turbines, particularly as the global economy electrifies. It is also a key metal for cables used in data centers, whose growth has been fueled by the rise of artificial intelligence (read: Follow Goldman with these commodity ETFs).
Copper demand from electric vehicles and the transportation sector is expected to grow about 5% this year, according to Bank of America forecasts. The International Energy Agency expects electricity demand from data centers to more than double to more than 1,000 terawatt hours (TWh) in 2026, from 460 TWh in 2022.
In addition, emerging trends to make the world carbon-free, President Biden’s intention to promote clean energy in the United States, and Europe and China’s strenuous efforts to spread clean energy in the long term will further fuel demand for copper.
On the other hand, the copper market is tense. Chinese copper smelters have begun reducing production by 5 to 10 percent in response to a substantial decrease in processing and refining costs. The Chinese government also plans to further regulate capacity expansion by imposing stricter criteria for the construction of new smelters, marking a significant shift towards capacity control, similar to measures already in place for other industries such as aluminum and petroleum refining.
Meanwhile, the International Copper Study Group lowered its forecast for excess supply for the metal this year due to a slower-than-expected ramp-up in production, delays in project commissioning and revisions to the production forecasts of the main producers. Copper production is now expected to grow by 0.5% from the previous estimate of 3.7%.
Pullback: a bullish sign
This short squeeze pushed the copper futures market into its largest backwardation on record (where later-dated contracts are cheaper than short-dated contracts). This indicates that the copper market is tightening and demand is robust, paving the way for a copper rally.
Short rallies typically occur in commodity markets as loss-making traders are forced to exit their positions under the pressure of increasing margin calls or the threat of having to deliver physical hardware – or pay trading fees. significant turnover – at the end of the contract.
ETF to exploit
US Copper Index Fund (CPER – Free report)
The United States Copper Index Fund seeks to track the performance of the SummerHaven Copper Index Total Return. The index is designed to reflect the investment return performance of a portfolio of copper futures contracts on the COMEX exchange.
The United States Copper Index Fund has accumulated $206.2 million in its asset base and charges 97 basis points in annual fees. It trades an average volume of 65,000 shares per day and has a Zacks ETF Rank #3 (Hold) with a High Risk Outlook (read: April emerges as the worst month of 2024: best ETF zones).
Global X Copper Miners ETF (COPX – Free report)
The Global X Copper Miners ETF provides global access to a basket of companies involved in copper mining. It tracks the Solactive Global Copper Miners Total Return Index and holds 40 stocks in its basket. Canadian companies occupy the largest share, at 36.4%, while the United States and China round out the next two spots.
The Global X Copper Miners ETF managed $2.4 billion in asset base while charging 65 basis points in fees per year. It trades in a good volume of 1.2 million shares per day on average (read: Copper ETF hits new 52-week high).
Sprott Copper Miners ETF (COPP – Free report)
The Sprott Copper Miners ETF is the only ETF focused purely on large-, mid-, and small-cap copper mining companies that provide a critical mineral needed for the clean energy transition. It tracks the Nasdaq Sprott Copper Miners Index and holds 40 stocks in its basket. Canadian companies occupy the largest share at 33.4%, followed by the United States (33.1%) and Chile (10.4%).
The Sprott Copper Miners ETF has accumulated $24.6 million in its asset base since its inception in March and trades in a lower volume of 42,000 shares. It charges 65 basis points in annual fees.
iShares Copper & Metals Mining ETF (ICOP – Free report)
The iShares Copper and Metals Mining ETF provides exposure to 35 global copper ore and metals miners who could benefit from increased demand for this limited resource. It tracks the STOXX Global Copper and Metals Mining Index, charging investors 47 basis points in annual fees. Here again, Canada takes the lion’s share with 32.9%, followed by the United Kingdom (15.2%) and Australia (11.1%).
The iShares Copper and Metals Mining ETF has only amassed $17.7 million in its asset base and trades a lower average volume of 22,000 shares per day (read: Mining ETFs gain in turbulent April with double-digit gains).
Sprott Junior Copper Miners ETF (COPJ – Free report)
The Sprott Junior Copper Miners ETF is the only ETF focused purely on junior copper mining companies, selected for their potential for significant revenue and asset growth by tracking the Nasdaq Sprott Junior Copper Miners Index. It holds 40 stocks in its basket, with Canadian companies holding the largest share at 51.2%. Australia and Peru complete the next two places.
The Sprott Junior Copper Miners ETF has $10.7 million in assets under management and trades in a lower average daily volume of 12,000 shares. It charges 75 basis points in annual fees and expenses.
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