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Copper Prices to Surge in 2024? Likely ETF Beneficiaries
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Copper prices are poised to surge by more than 75% in the next two years, primarily due to disruptions in mining supply chains and a growing demand for the metal, driven by the global push for renewable energy. This forecast comes from a report by BMI, a research unit of Fitch Solutions, per a CNBC article.
Currently, copper on the London Metal Exchange is trading at about $8,559 per ton. The metal is essential for manufacturing electric vehicles, power grids, and wind turbines, making it a crucial component of the energy transition ecosystem.
Green Energy Transition and Dollar Decline
The rising demand for copper, fueled by the green energy transition, combined with a projected decline in the U.S. dollar in the latter half of 2024, is expected to drive copper prices higher. Market observers anticipate the U.S. Federal Reserve to reduce interest rates, weakening the dollar and making dollar-priced copper more attractive to international buyers.
Macro Factors Favoring Copper
Experts attribute the positive outlook for copper to macroeconomic factors. Matty Zhao, the Head of Asia-Pacific Basic Materials at Bank of America Securities, cites potential Fed rate cuts and a weaker U.S. dollar as significant drivers for copper's rise, as quoted on CNBC.
Renewable Energy Boost
At the COP28 climate change conference, over 60 countries endorsed a plan to triple global renewable energy capacity by 2030, a development that Citibank views as "extremely bullish for copper." Citibank's December report predicts that these increased renewable energy targets could lead to an additional 4.2 million tons of copper demand by 2030, potentially driving copper prices to $15,000 per ton by 2025, surpassing the previous record of $10,730 per ton achieved in March the previous year, published on CNBC.
Mining Disruptions and Supply Shortage
Goldman Sachs predicts a copper deficit of over half a million tons in 2024, attributing this to mining disruptions. For instance, First Quantum Minerals halted production at the Cobre Panamá, one of the world's largest copper mines, due to environmental concerns and legal issues.
Anglo American, another major producer, announced plans to reduce copper output in 2024 and 2025 to cut costs, according to the above-mentioned CNBC article. Goldman's analysts believe that these supply cuts indicate a clear tightening of the copper market. They expect copper prices to reach $10,000 per ton within the year and anticipate even higher prices in 2025.
ETF Beneficiaries
Against this backdrop, below we highlight a few ETF plays that could gain amid a copper rally.
The underlying SummerHaven Copper Index Total Return reflects the performance of the investment returns from a portfolio of copper futures contracts on the COMEX exchange. It charges 97 bps in fees.
The underlying Solactive Global Copper Miners Total Return Index is designed to reflect the performance of the copper mining industry. It is comprised of selected companies globally that are actively engaged in some aspect of the copper mining industry, such as copper mining, refining, or exploration. The fund charges 65 bps in fees.
iShares MSCI Peru and Global Exposure ETF (EPU - Free Report)
BMI estimates that the main beneficiaries of the copper boom will be Chile and Peru, both possessing substantial reserves of green transition minerals like lithium and copper. These countries are expected to benefit from increased investment and higher export demand, with Chile holding approximately 21% of global copper reserves. Peru has about 9% share of global copper reserves.
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
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Copper Prices to Surge in 2024? Likely ETF Beneficiaries
Copper prices are poised to surge by more than 75% in the next two years, primarily due to disruptions in mining supply chains and a growing demand for the metal, driven by the global push for renewable energy. This forecast comes from a report by BMI, a research unit of Fitch Solutions, per a CNBC article.
Currently, copper on the London Metal Exchange is trading at about $8,559 per ton. The metal is essential for manufacturing electric vehicles, power grids, and wind turbines, making it a crucial component of the energy transition ecosystem.
Green Energy Transition and Dollar Decline
The rising demand for copper, fueled by the green energy transition, combined with a projected decline in the U.S. dollar in the latter half of 2024, is expected to drive copper prices higher. Market observers anticipate the U.S. Federal Reserve to reduce interest rates, weakening the dollar and making dollar-priced copper more attractive to international buyers.
Macro Factors Favoring Copper
Experts attribute the positive outlook for copper to macroeconomic factors. Matty Zhao, the Head of Asia-Pacific Basic Materials at Bank of America Securities, cites potential Fed rate cuts and a weaker U.S. dollar as significant drivers for copper's rise, as quoted on CNBC.
Renewable Energy Boost
At the COP28 climate change conference, over 60 countries endorsed a plan to triple global renewable energy capacity by 2030, a development that Citibank views as "extremely bullish for copper." Citibank's December report predicts that these increased renewable energy targets could lead to an additional 4.2 million tons of copper demand by 2030, potentially driving copper prices to $15,000 per ton by 2025, surpassing the previous record of $10,730 per ton achieved in March the previous year, published on CNBC.
Mining Disruptions and Supply Shortage
Goldman Sachs predicts a copper deficit of over half a million tons in 2024, attributing this to mining disruptions. For instance, First Quantum Minerals halted production at the Cobre Panamá, one of the world's largest copper mines, due to environmental concerns and legal issues.
Anglo American, another major producer, announced plans to reduce copper output in 2024 and 2025 to cut costs, according to the above-mentioned CNBC article. Goldman's analysts believe that these supply cuts indicate a clear tightening of the copper market. They expect copper prices to reach $10,000 per ton within the year and anticipate even higher prices in 2025.
ETF Beneficiaries
Against this backdrop, below we highlight a few ETF plays that could gain amid a copper rally.
Copper ETFs
United States Copper Index Fund (CPER - Free Report)
The underlying SummerHaven Copper Index Total Return reflects the performance of the investment returns from a portfolio of copper futures contracts on the COMEX exchange. It charges 97 bps in fees.
Copper Miners
Global X Copper Miners ETF (COPX - Free Report)
The underlying Solactive Global Copper Miners Total Return Index is designed to reflect the performance of the copper mining industry. It is comprised of selected companies globally that are actively engaged in some aspect of the copper mining industry, such as copper mining, refining, or exploration. The fund charges 65 bps in fees.
Country ETFs – Chile and Peru
iShares MSCI Chile ETF (ECH - Free Report)
iShares MSCI Peru and Global Exposure ETF (EPU - Free Report)
BMI estimates that the main beneficiaries of the copper boom will be Chile and Peru, both possessing substantial reserves of green transition minerals like lithium and copper. These countries are expected to benefit from increased investment and higher export demand, with Chile holding approximately 21% of global copper reserves. Peru has about 9% share of global copper reserves.
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)