Behind the 30% rise in copper mines! By mastering these 5 concept stocks, you can ride the trend

Recently, the copper mining sector has been active frequently. Freeport-McMoRan (FCX), a global leader, has surged nearly 30% in just a month and a half, and international copper prices have also risen by 17% over two months. Where does this wave of gains come from? Why are investors rushing into copper concept stocks? This article will provide an in-depth analysis of the investment logic and opportunities in the copper industry for 2024.

Why Do Rising Copper Prices Make Copper Stocks Soar? The Economics Behind It

Copper spans an entire industry chain from mining to final application. The upstream is copper mining, the midstream involves smelting and processing, and downstream includes manufacturing of copper wires, copper foil, and other applications.

The key point is: copper concept stocks mainly refer to upstream companies that control copper ore resources. Freeport-McMoRan (FCX) is the absolute leader in this field. Since the products of copper mining companies are copper ore and electrolytic copper, fluctuations in copper prices will naturally directly impact their performance.

Data comparisons reveal the clue. Comparing the copper mining ETF (ticker: COPX) with the London Metal Exchange copper price trend shows a clear synchronization—when copper prices rise, mining companies’ profits increase accordingly, and their stock prices tend to rise with the tide.

Master the Industry Chain to Pick the Right Concept Stocks

To invest in copper mining stocks, you must first understand the structure of the copper industry chain—upstream, midstream, and downstream. Different segments react differently to copper price fluctuations.

The industry chain is divided into three layers: upstream is mining, midstream is smelting, downstream is processing and application.

The closer to the source, the fewer market participants and the larger the companies, resulting in less competitive pressure. Conversely, the further downstream, the more competitors there are, and profit margins are squeezed tighter.

Upstream mining stocks: Rising copper prices mean profits

Upstream mining companies have a positive correlation with copper prices—higher copper prices mean greater profit margins. These companies are usually large-scale with high market concentration, making it easier to capture more profits. Our focus on international copper concept stocks mainly concentrates in this area.

Among the top ten global copper mining companies, Freeport-McMoRan (FCX) leads with a production of 1,744 thousand tons, followed by Codelco (Chile National Copper Corporation) with 1,728 thousand tons. BHP ranks third with 1,583 thousand tons. Glencore is a diversified mining group with a copper output of 1,196 thousand tons. Southern Copper (SCCO) produces 958 thousand tons and is also a heavyweight player. In Asia, Zijin Mining (2899.HK) produces 584 thousand tons, First Quantum Minerals (FM) 816 thousand tons, KGHM Poland 754 thousand tons, Newmont Goldcorp (NGLOY) 647 thousand tons, and Antofagasta (ANTO) 722 thousand tons.

Midstream smelting stocks: Earning purely from processing fees

Midstream smelting companies extract refined copper from ore. Essentially, they are passive recipients of copper prices, earning only from smelting fees (industry term: TC rate). Therefore, fluctuations in copper prices have limited impact on their revenue.

When the TC fee rate is high, it indicates good profitability for smelters; a low rate suggests squeezed margins. Currently, processing fees are relatively low, which limits the profitability of these companies. Unless there is a significant improvement in processing fees in the future, investing in such companies carries higher risk.

Downstream processing stocks: Rising copper prices hurt profits

For downstream companies, copper is a cost component. A surge in copper prices erodes profit margins and increases operational pressure. Downstream mainly includes manufacturers of copper wires, cables, and copper foil, which are ultimately used in power, electrical, and transportation sectors.

In Taiwan’s stock market, First Copper (2009), HuaRong (1608), and DaYa (1609) are all downstream processing concept stocks. Their performance logic is completely opposite to upstream mining stocks.

Will Copper Prices and Concept Stocks Continue to Rise in 2024?

The copper sector performed well overall in 2024, with significant gains. Looking ahead, we believe there are still reasons to be optimistic.

There are three main supporting factors:

1. Tightening supply. Over the past decade, global copper mining capital expenditure has been relatively low, leading to slow growth in new capacity. Short-term, large-scale supply releases are unlikely.

2. Strong demand. Under carbon neutrality commitments, investments in power and grid infrastructure continue to accelerate. Additionally, the explosive growth in global AI computing power drives data center expansion, which significantly increases demand for electricity and cables, indirectly boosting copper usage.

3. Economic cycle transition. The global economic momentum is shifting. Emerging industries such as new energy, 5G, and AI are becoming growth engines, all requiring large amounts of copper resources.

Given the limited supply and continuous demand growth, there are still investment opportunities in copper stocks in the future.

Three International Concept Stocks You Must Watch

1. Freeport-McMoRan (FCX.N): A Pure Copper Mining Leader

Founded in 1987, headquartered in Phoenix, Arizona, USA, focusing on copper, gold, and molybdenum mining. In terms of company size and copper business proportion, it is the most pure-play copper mining company globally. It ranks first in global copper production, truly an industry leader.

2. Glencore (GLEN.L): A Diversified Mining Giant

Established in 1974, headquartered in Baar, Switzerland. This is a conglomerate involved in metals, minerals, energy, and agricultural products, covering steel, power, oil, mining, and trading. Although copper is not its sole focus, it benefits from the overall mining boom.

3. BHP (BHP.AX): An Integrated Mining Carrier

Founded in 1885, headquartered in Melbourne, Australia. It mines iron ore, metallurgical coal, copper, and other minerals, with annual product categories including copper, iron, coal, silver, lead, zinc, molybdenum, uranium, and gold. While copper is not its main business, as a comprehensive mining leader, growth in copper operations will still drive overall performance.

Two Taiwan Stock Concept Stocks to Watch First

Taiwan Leader 1: First Copper (2009)

Founded in 1969, listed in 1989. Specializes in producing copper sheets and copper alloys, used in semiconductors, automotive parts, consumer electronics, and construction. It is a downstream company in the copper industry chain.

Taiwan Leader 2: HuaRong (1608)

Founded in 1956, one of Taiwan’s three major wire and cable manufacturers. Also downstream in the industry chain, rising copper prices may exert some pressure on its profit margins.

To Enter Now or Wait for a Pullback? Short, Medium, and Long-term Strategies

Short-term view: Copper prices and many copper stocks have already experienced substantial gains, with potential technical correction risks. Investors should stay alert and wait for appropriate pullback levels and technical signals before entering.

Medium to long-term outlook: The supply-demand pattern remains optimistic. Policies on carbon neutrality and global AI investments will continue to drive demand growth, and the overall trend of copper stocks should be upward.

Choosing the right timing and combining risk management is key to success.

How to Invest in Copper Stocks? Four Methods for You

The stocks mentioned in this article can be traded directly on the US or Taiwan stock markets, making it very convenient. When choosing a broker, besides considering platform legality and strength, also pay attention to deposit requirements, product variety, trading smoothness, and Chinese language support.

Common investment methods include:

• Direct purchase of individual stocks
• Investing in copper mining ETFs (risk concentrated, diversified approach)
• Participating in copper futures trading
• Using Contract for Difference (CFD) tools

CFD tools are especially suitable for investors who want to allocate both physical copper and copper mining stocks simultaneously. One account allows trading stocks and commodities, saving the hassle of managing multiple accounts.

Opportunities and Risks Coexist

Although copper has shown strong short-term momentum and has a good long-term supply-demand outlook, remember it is ultimately a resource commodity, subject to global economic cycles.

Investment advantages: Copper prices and copper stocks can well reflect economic cycles and are difficult to manipulate artificially. Understanding the economic cycle helps grasp investment opportunities.

Risks: If the Federal Reserve continues to raise interest rates in 2024, it could suppress global demand and negatively impact copper, potentially pressuring copper stock prices.

Therefore, when investing in copper concept stocks, it is crucial to pay close attention to the global economic cycle. Buy during economic upswings and avoid risks when signs of downturn appear.

Key Takeaways

This article has outlined the structure of the copper industry chain and the characteristics of upstream, midstream, and downstream companies. Based on supply and demand analysis, we introduced three international concept stock leaders and two Taiwan stock options, covering the entire industry chain from mining to processing.

The core investment strategy is to follow the global economic cycle—hold during growth phases and avoid risks during downturns. Currently, the Federal Reserve’s monetary policy is the biggest variable, requiring close attention to its impact on copper prices and copper stocks.