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Investing in copper stocks
A rare earth metal with a wide range of applications. What you should consider before you invest.
Copper can be found in low concentrations in the earth’s crust. It has an abundance of uses — from our homes to industrial machinery. But it’s difficult and expensive to mine. Here’s what you should know about copper stocks.
What is copper and how is it used?
Copper is a reddish-orange metal that is corrosion-resistant and an excellent conductor of heat and electricity. In its natural state, copper is soft, solid and can be molded into different shapes and thicknesses.
It is naturally found in ore deposits that are mined or leached. Mining crushes and grinds the ore into powder, where the unwanted materials and other impurities are removed. Leaching uses sulphuric acid to remove the copper from the other ore minerals.
Copper has a plethora of uses across five main markets:
- Construction. Wiring, heating, refrigeration and plumbing all use copper materials.
- Electrical and electronics. Utilities and electronics need copper wiring and parts.
- Consumer products. Cookware and household appliances use their fair share of this raw material.
- Transportation. Vehicles, including airplanes, cars and trucks, are manufactured with copper.
- Industrial equipment. Machinery consumes millions of pounds of copper every year.
Copper stocks generally refer to companies that explore, develop, produce and sell copper all over the world.
Why invest in copper stocks?
Copper has an expansive range of industrial and consumer applications — from factories and transmission lines to homes and electronics. And the recent push for electric vehicles is likely to increase demand for this essential metal.
Electric vehicles have five times more copper than traditional cars. And this new driving technology will also require large amounts of copper to support its electric charging infrastructure. Copper’s strong ties to many sectors of the economy likely mean that the demand isn’t going anywhere.
Risks of investing in copper
While copper is one of the most abundant metals on earth, only a small portion is economically viable to extract at today’s prices using current technologies. So mining companies are vulnerable to copper price fluctuations, which are easily impacted by geopolitics.
For example, global copper prices fell to its two-year all-time low in 2019. It was collateral damage amid the escalating trade war between the United States and China — a country which consumes over 50% of the world’s metal.
An additional risk is that there are other practical substitutes for copper. For example, manufacturers can use aluminum instead of copper in automobile radiators, optical fiber in telecommunications equipment and plastics for pipes and plumbing fixtures. These substitutions can lower demand and cause copper and its stock prices to fall.
What ETFs track the copper category?
Interested in copper stocks? In addition to the Toronto Stock Exchange, many copper stocks trade on international exchanges, such as the London and New York stock exchanges.
These North American exchange-traded funds (ETFs) track the price of copper:
- Global X Copper Miners ETF (COPX)
- United States Copper Index Fund (CPER)
- iPath Series B Bloomberg Copper Subindex Total Return ETN (JJC)
Compare trading platforms
One of the simplest ways to invest in copper is with a domestic brokerage account, which allows you to buy stocks on the TSX. But if you want to invest in international copper stocks, you’ll need an international brokerage account.
Use the table below to compare domestic brokerage accounts.
Copper is involved in a lot of economic sectors. While its consumer and industrial applications keep copper in demand, you’ll need to keep a pulse on global trade wars.
Consider a few different trading platforms that offer international brokerage accounts to add copper to your investment portfolio.
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