2024 Copper Investment Hotspot: Why Consider Buying Copper Stocks Now

The “Gap” in Copper Prices Is Coming Soon

After years, the copper market is entering a period widely favored by institutional investors. Currently, the price of copper per ton remains stable at $8,500, but behind this figure lies a critical market imbalance signal: Global copper inventories are rapidly declining.

Looking back over the past year, copper prices fluctuated between $7,800 and $9,500. But what’s truly noteworthy is that this inventory decline is not a short-term fluctuation but a structural supply pressure. Real-time data from the London Metal Exchange (LME) shows that inventory levels have fallen below dangerous levels.

Why is copper so in demand?

Copper’s uses are no longer limited to traditional industries. From electric vehicles to solar panels, from wind power to grid infrastructure upgrades, copper has become the “invisible champion” of energy transition. In 2023, global consumption exceeded 31.6 million tons, with renewable energy applications accounting for 7% (2.84 million tons), and this proportion is exploding at a 17% annual growth rate.

In comparison, growth in traditional applications (construction, transportation, manufacturing) is only 1%. By 2030, the share of copper used in renewable energy is expected to jump from 7% to 17%, indicating huge potential for increased demand.

But the problem is: Mining companies have not kept pace. Global mining capacity has seen little new project development, and existing mines have limited room for expansion. This “supply gap” is the direct reason for rising copper prices.

Vulnerability of the Global Copper Supply Pattern

Copper mining production is highly concentrated, which itself is risky. Just five countries control 72% of global output:

• Chile 27% (politically stable but drought-affected)
• Peru 11% (geopolitical risks rising)
• China 9%
• Democratic Republic of the Congo 7% (high political risk)
• USA 6%

Reserve distribution is also uneven, with Chile and Australia accounting for 43%. Any political upheaval, tightening environmental policies, or natural disasters in any major producing country could trigger a global supply crisis.

In 2023, there were multiple mine production reduction events, which have not yet fully recovered. This creates conditions for subsequent price increases.

Macro Cycles and China Factors

The global economy is expected to improve in 2024. The Federal Reserve plans to start cutting interest rates in March, the European Central Bank will follow in mid-June, and China also lowered its benchmark interest rate in January. This means liquidity will be released and investment demand will rebound.

Although China’s real estate market has stagnated (growth rate zero), infrastructure investment and industrial upgrades still require ongoing support. Coupled with moderate recovery in the US and Europe, global growth is projected around 2-3%. Considering the interest rate cut cycle, this macro environment favors cyclical commodities like copper.

Major risks include a sudden surge in oil prices triggering new inflation, or geopolitical conflicts escalating and stalling growth. But from current probabilities, a moderate growth scenario remains dominant.

Why Invest in Copper Stocks Instead of Futures or ETFs?

Investors face three options:

Copper mining listed companies (e.g., Freeport-McMoRan, Southern Copper, etc.)

• Advantages: Highly correlated with copper prices, also pay dividends and buybacks
• Disadvantages: Company operational risks (strikes, taxes, rising costs) can amplify volatility
• Suitable for: Investors who can tolerate short-term fluctuations but seek long-term appreciation

Copper ETFs (e.g., BlackRock’s ICLP, etc.)

• Advantages: Directly track copper prices, avoid company operational risks, transparent fees
• Disadvantages: Annual fee up to 1%, no dividends
• Suitable for: Passive investors seeking simple allocation

Copper Futures

• Advantages: High leverage, large short-term profit potential
• Disadvantages: Extremely risky, not suitable for retail investors
• Suitable for: Professional traders hedging risks

For most individual investors, buying copper stocks is the best balance of risk and reward. Choosing financially sound companies with good cost control based on fundamental analysis can yield double returns when copper prices rise.

Chinese Spring Festival and Inventory Cycles

Every year around mid-February, China’s Spring Festival holiday (about two weeks) causes a temporary demand drop and a short-term inventory rise. But this is only a technical rebound; the real test comes in March.

After the festival, the global economy resumes normal operation. Coupled with the backlog of mine production cuts in 2023 that have not yet been digested, inventories are expected to decline further. Historical experience shows that when LME inventories fall below 1 million tons, copper prices tend to rise significantly.

This sets a potential price increase window from March to June 2024.

How to Develop an Investment Plan for Copper Stocks

Long-term investors’ strategy

• Select large copper companies with stable dividends and strong cost competitiveness
• Allocate 5-10% of total assets
• Set clear stop-loss points (usually 15-20% below entry price)
• Use macro cycles: hold positions before global growth peaks, reduce holdings at the peak

Short-term traders’ strategy

• Closely monitor LME inventory weekly reports and mining capacity news
• Combine technical analysis to identify buy/sell signals
• Strictly implement risk-reward ratios (expected gains ≥ expected losses)
• Set stop-loss for each trade, with profit targets higher than risk

Resource stocks are inherently cyclical assets, not growth stocks. The key is to enter during the upward phase of the cycle, not to try to predict the top precisely. The current inventory reduction and global rate cut expectations make this an opportune moment.

Renewable Energy Provides Long-term Support for Copper Demand

In terms of energy per unit, solar requires 4 tons of copper per MW, wind power 1 ton per MW, while traditional power plants require minimal amounts. Electric vehicles use four times more copper than fuel-powered cars.

Although these new applications accounted for only 7% of global copper consumption in 2023, their growth rate is 17%, far exceeding the 1% growth in traditional applications. This ensures that at least over the next decade, whenever macro conditions improve, copper’s fundamental demand will be re-priced.

Practical Investment Recommendations

1. Immediate action reasons: Global interest rate cuts, liquidity improvement, inventories at historic lows
2. Selection of targets: Compare costs and dividends of Freeport-McMoRan (FCX), Southern Copper (SCCO), BHP, etc.
3. Risk management: Set stop-loss levels, limit single positions to no more than 10% of total assets
4. Position window: Expect the main rise from March to June; consider reducing holdings when global growth signals peak

Copper stocks are indeed attractive for 2024-2025 investments, but only if you do your homework, control risks, and stick to discipline. The macro shift is favorable, supply gaps are evident, and low inventories confirm the trend—these conditions are rarely all present simultaneously, and now is one of those rare moments.