The truth behind the surge in copper stocks: Who is profiting in the industry chain? How should you invest?

Copper Prices Surge 30%, Can This Rally Still Be Followed?

In the past two months, copper prices have risen by 17%, and Freeport-McMoRan (FCX), the world’s leading copper miner, saw its stock price increase by 30% in just a month and a half. Is this surge in copper stocks a short-term hype or a long-term trend? To answer this question, we must first understand the operational logic of the copper industry chain.

From mine to end-use application, copper goes through three stages: mining, smelting, and processing. In this industry chain, companies at different positions react very differently to copper price changes—some profit immensely, others get trapped in losses. Only by understanding this can we accurately assess investment opportunities in copper stocks.

Industry Chain Deep Dive: Who Are the Real Winners?

Upstream Mining Companies: The Higher Copper Prices, the Thicker Profits

Upstream copper companies mine and sell copper. When copper prices rise, their profits increase directly. High industry concentration means larger firms can more easily monopolize pricing power and secure bigger shares of the profits.

Among the top ten copper mining companies globally, Freeport-McMoRan (FCX) leads with an output of 17,440 thousand tons, making it the undisputed leader in copper stocks. Next are Codelco (17,283 thousand tons), BHP (15,831 thousand tons), Glencore (11,965 thousand tons), and others. These upstream companies show a strong positive correlation with copper prices—every 10% increase in copper price significantly improves their profitability.

Comparing copper price trends with the performance of copper ETFs (COPX), it’s clear that stock prices generally move in sync with copper prices. This is because the fate of copper stocks is directly tied to copper prices.

Midstream Smelting Companies: Only Earning Processing Fees, Limited Impact from Copper Price Fluctuations

Midstream smelting plants act as “transporters”—they refine copper concentrate into refined copper, earning smelting or processing fees (TC). Copper price increases do not directly benefit them because their costs and revenues grow in tandem.

Currently, processing fees are at low levels, indicating weak profitability for these companies. Unless processing fees rise in the future, investing in midstream smelting companies is not recommended.

Downstream Processing Companies: Rising Copper Prices Bring Cost Pressures

Downstream companies like wire, cable, and foil manufacturers face the opposite challenge—copper is their main cost. Every cent increase in copper price erodes their profit margins. Taiwanese copper concept stocks such as First Copper (2009), HuaRong (1608), and DaYa (1609) are all downstream in the industry chain. Rising copper prices are actually unfavorable for them.

Why Are Copper Stocks Worth Watching in 2024?

Three core drivers support the outlook for copper stocks:

Tight Supply: Over the past decade, global copper mining capital expenditure has been insufficient, leading to limited new capacity. It takes 5-10 years from exploration to production, making short-term increases in copper supply difficult.

Robust Demand: The push for carbon neutrality boosts investments in power grids and electrical infrastructure, requiring large amounts of copper cables. More importantly, the global AI race creates additional demand—data centers, servers, and high-end chips all need substantial copper and power supply.

Supply-Demand Imbalance Opportunity: In 2024, copper supply growth will be limited while demand continues to grow. This creates investment opportunities in copper stocks.

Five Copper Stocks to Watch Closely

Top Three International Copper Stocks

Freeport-McMoRan (FCX.N): The world’s largest copper miner, with the highest proportion of copper business, making it the purest copper stock. Founded in 1987 and headquartered in Arizona, USA. In terms of scale and purity of copper-related business, FCX is the absolute leader among international copper stocks.

Glencore (GLEN.L): A diversified mining conglomerate involved in copper, zinc, coal, oil, and more. Established in 1974 and headquartered in Switzerland. Currently, with the mining cycle rising, Glencore benefits from its diversified resource portfolio.

BHP (BHP.AX): An Australian mining giant involved in iron ore, coal, copper, and other resources. Founded in 1885, one of the oldest large-scale mining companies globally. Compared to FCX’s focus on copper, BHP’s copper business accounts for a smaller share, but the overall mining cycle supports its stock price growth.

Taiwan’s Copper Stocks: The Double Stars

First Copper (2009): Established in 1969, mainly produces copper sheets and alloys for semiconductors, automotive, and electronics industries. Positioned downstream, their performance is affected by copper prices, so cost control ability is crucial.

HuaRong (1608): One of Taiwan’s three major wire and cable manufacturers, founded in 1956. Also downstream, rising copper prices pressure their gross margins.

Risks and Opportunities in Copper Stocks

Short-term Correction Risks: Recent gains in copper prices and stocks are substantial, with potential for technical pullbacks. It’s advisable to wait for a correction and confirm technical signals before re-entering.

Economic Cycle Risks: Copper is a leading economic indicator and highly sensitive to global economic changes. If the Federal Reserve continues to raise interest rates and the global economy weakens, copper prices and stocks will face downward pressure. Macroeconomic cycles should be carefully considered.

Long-term Growth Logic: The energy transition driven by carbon neutrality and AI is a multi-decade trend, with significant growth potential for copper demand. Upstream copper miners, with constrained supply, stand to benefit from increased profit margins.

How to Invest in Copper Stocks?

Besides directly buying individual stocks, options include:

• Copper Concept ETF: Tracks a basket of copper mining companies, diversifying risk.
• Copper Futures: Trade spot copper prices with high leverage and risk.
• CFD (Contracts for Difference): Trade copper stocks and commodities within one account, offering flexibility and efficiency.

When choosing a broker, focus on platform legality, deposit convenience, Chinese language support, product variety, and operational smoothness.

Summary

The investment logic of copper stocks is clear: upstream mining companies benefit directly from rising copper prices; midstream smelting firms have stable but limited profits; downstream processing companies face cost pressures. The supply-demand landscape in 2024 is favorable, with AI and energy transition driving new demand, creating opportunities for upstream copper miners.

The key is to follow the global economic cycle—buy and hold copper stocks during the uptrend, and cut losses promptly when signs of economic downturn appear. Currently, copper stocks have already surged in the short term; patience and waiting for a correction may be the wiser approach.