Copper prices have surged to a two-year high, buoying shares of copper mining companies. According to Ole Hansen, commodity analyst at Saxo Bank, the rally is driven by global growth, optimism about demand, and reduced copper availability on the market.
Price Rise After Two Sluggish Years
Copper prices have been sluggish for the past two years due to rising financing costs, slowing growth in China, and central banks’ efforts to combat inflation by raising interest rates. However, in recent months, copper prices have rebounded, reaching levels last seen in June 2022.
Factors Driving the Rise
Several factors are contributing to the rise in copper prices. These include:
- Global Growth:Â A growing economy increases demand for copper, which is used in a wide range of industries.
- Demand Optimism:Â Demand for copper is expected to grow significantly in the coming decade, driven by investments in decarbonization and green technologies.
- Reduced Availability:Â Mining companies have announced production cuts due to various factors such as increased mining costs, declining ore quality, regulatory hurdles, and adverse weather events.
- Ongoing Green Transition:Â The increasing use of copper in the renewable energy and electric vehicle sectors is boosting demand for the metal.
- Increased Use of Artificial Intelligence:Â Artificial intelligence requires extensive copper infrastructure, which is also contributing to demand growth.
Potential for a New Record
Hansen predicts that copper prices could reach a new record high in the second half of 2024. According to him, a price of $10,000 (approximately €9,400) per tonne is needed to achieve this target over the next decade.
Conclusion
The rise in copper prices and mining company stocks signals strong demand for the metal. This trend is expected to continue in the coming years due to global growth, investments in green technologies, and reduced copper availability.
Copper Mining Stocks on the Rise
In addition to the general rise in copper mining company stocks, some specific companies have seen significant growth in recent days. These include:
- BHP Group (BHP):Â Australian mining company BHP has seen a 7.5% increase in the past week. The company mines copper, iron ore, and aluminum and is benefiting from rising commodity prices.
- Rio Tinto (RIO):Â Another Australian mining giant, Rio Tinto, is up 6.2% over the past 5 days. The company focuses on mining copper, aluminum, and other metals and is also benefiting from favorable developments in the commodity markets.
- Freeport-McMoRan (FCX):Â American mining company Freeport-McMoRan, which focuses on copper and gold mining, has seen a 5.8% increase this week. The company is benefiting from rising copper prices and a resurgence in the gold market.
- Southern Copper Corporation (SCCO):Â Peruvian mining company Southern Copper Corporation, which focuses on copper and zinc mining, has seen a 4.9% increase in the past 4 days. The company is benefiting from rising copper prices and strong demand for zinc.
It is important to note that the rise in copper mining company stock prices can also be influenced by other factors such as earnings reports, investments in new projects, or political stability in the countries where these companies operate.
In addition to the factors you mentioned, the price of copper itself can also significantly impact copper mining company stock prices. When the price of copper goes up, copper mining companies tend to be more profitable, which can lead to higher stock prices. Conversely, when the price of copper goes down, copper mining companies may see their profits decline, which can put downward pressure on their stock prices.
Sources of Information:
- https://www.reuters.com/markets/companies/BHP/
- https://www.reuters.com/markets/companies/RIO/
- https://www.reuters.com/markets/companies/FCX/
- https://www.reuters.com/markets/companies/SCCO.N/
- https://www.investing.com/commodities/copper
- https://www.kitco.com/price/precious-metals/copper
- https://www.marketwatch.com/
