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AI, EV Power Copper Price to New Heights: ETFs to Tap
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Copper prices are rallying on bullish long-term trends and tight supply conditions. A short squeeze pushed copper futures to a record high and at a record premium over later months. Notably, Comex futures for July delivery rose as much as 4.2% in the May 15 trading session at the time of writing to $5.08 per pound. The metal has gained more than 25% so far this year.
Investors seeking to tap the bullish trend in the commodity should consider United States Copper Index Fund (CPER - Free Report) , Global X Copper Miners ETF (COPX - Free Report) , Sprott Copper Miners ETF (COPP - Free Report) , iShares Copper and Metals Mining ETF (ICOP - Free Report) and Sprott Junior Copper Miners ETF (COPJ - Free Report) . Metal miners are the biggest beneficiaries of the surge in copper price as the mining companies act as a leveraged play on the underlying metal prices and thus tend to experience more gains than their bullion cousins in a rising metal market.
Demand/Supply Imbalance
The demand for copper has been on the rise amid a rush to build data centers and the continued electrification of the global economy. The red metal is an integral element in manufacturing electric vehicles, power grids and wind turbines, especially as the global economy electrifies. It is also a key metal for cables used in data centers, whose growth has been fueled by an artificial intelligence boom (read: Follow Goldman With These Commodity ETFs).
According to forecasts by the Bank of America, copper demand from electric vehicles and the transportation sector is set to increase by around 5% this year. The International Energy Agency expects power demand from data centers to more than double to over 1000 terawatt-hours (TWh) in 2026 from 460 TWh in 2022.
Additionally, emerging trends for making the world carbon-free, President Biden’s intention to boost clean energy in the United States, and Europe and China’s keen efforts to spread clean energy over the long run will further fuel copper demand.
On the other hand, the copper market is tightening. Chinese copper smelters have initiated production cuts of 5-10% in response to a substantial decrease in treatment and refining charges. China’s government also made plans to regulate capacity expansion further by imposing stricter criteria for new smelter constructions, marking a significant shift toward capacity control, similar to measures already in place for other industries such as aluminum and oil refining.
Meanwhile, the International Copper Study Group has slashed its supply surplus forecasts for the metal this year due to a slower-than-expected ramp-up of production, delays in project commissioning and revised output guidance from major producers. Copper production is now expected to grow 0.5% compared with the previous estimate of 3.7%.
Backwardation: A Bullish Sign
The short squeeze pushed the copper futures market into its biggest-ever backwardation (where later-dated contracts are cheaper than near-term contracts). This signals that the copper market is tightening and demand is robust, paving the way for a copper rally.
Short-squeeze rallies typically occur in commodities markets as loss-making traders are forced to exit positions under pressure from ballooning margin calls or the threat of having to deliver physical material — or pay a big rollover fee — when the contract reaches expiry.
United States Copper Index Fund seeks to track the performance of the SummerHaven Copper Index Total Return. The index is designed to reflect the performance of the investment returns from a portfolio of copper futures contracts on the COMEX exchange.
United States Copper Index Fund has accumulated $206.2 million in its asset base and charges 97 bps in annual fees. It trades in an average volume of 65,000 shares a day and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: April Emerges as Worst Month of 2024: Best ETF Areas).
Global X Copper Miners ETF offers global access to a basket of companies involved in the mining of copper. It tracks the Solactive Global Copper Miners Total Return Index and holds 40 stocks in its basket. Canadian firms take the largest share at 36.4%, while the United States and China round off the next two spots.
Global X Copper Miners ETF has managed $2.4 billion in its asset base while charging 65 bps in fees per year. It trades in a good volume of 1.2 million shares a day on average (read: Copper ETF Hits New 52-Week High).
Sprott Copper Miners ETF is the only pure-play ETF focused on large-, mid- and small-cap copper mining companies that are providing a critical mineral necessary for the clean energy transition. It follows the Nasdaq Sprott Copper Miners Index and holds 40 stocks in its basket. Canadian firms take the largest share at 33.4%, followed by the United States (33.1%) and Chile (10.4%).
Sprott Copper Miners ETF has accumulated $24.6 million in its asset base since its inception in March and trades in a lower volume of 42,000 shares. It charges 65 bps in annual fees.
iShares Copper and Metals Mining ETF offers exposure to 35 global copper and metal ore miners who may benefit from increased demand for this limited resource. It follows the STOXX Global Copper and Metals Mining Index, charging investors 47 bps in annual fees. Here again, Canada takes the lion's share at 32.9%, followed by the United Kingdom (15.2%) and Australia (11.1%).
Sprott Junior Copper Miners ETF is the only pure-play ETF focused on small copper miners, selected for their potential for significant revenue and asset growth by tracking the Nasdaq Sprott Junior Copper Miners Index. It holds 40 stocks in its basket, with Canadian firms taking the largest share at 51.2%. Australia and Peru round off the next two spots.
Sprott Junior Copper Miners ETF has AUM of $10.7 million and trades in a lower average daily volume of 12,000 shares. It charges 75 bps in annual fees and expenses.
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AI, EV Power Copper Price to New Heights: ETFs to Tap
Copper prices are rallying on bullish long-term trends and tight supply conditions. A short squeeze pushed copper futures to a record high and at a record premium over later months. Notably, Comex futures for July delivery rose as much as 4.2% in the May 15 trading session at the time of writing to $5.08 per pound. The metal has gained more than 25% so far this year.
Investors seeking to tap the bullish trend in the commodity should consider United States Copper Index Fund (CPER - Free Report) , Global X Copper Miners ETF (COPX - Free Report) , Sprott Copper Miners ETF (COPP - Free Report) , iShares Copper and Metals Mining ETF (ICOP - Free Report) and Sprott Junior Copper Miners ETF (COPJ - Free Report) . Metal miners are the biggest beneficiaries of the surge in copper price as the mining companies act as a leveraged play on the underlying metal prices and thus tend to experience more gains than their bullion cousins in a rising metal market.
Demand/Supply Imbalance
The demand for copper has been on the rise amid a rush to build data centers and the continued electrification of the global economy. The red metal is an integral element in manufacturing electric vehicles, power grids and wind turbines, especially as the global economy electrifies. It is also a key metal for cables used in data centers, whose growth has been fueled by an artificial intelligence boom (read: Follow Goldman With These Commodity ETFs).
According to forecasts by the Bank of America, copper demand from electric vehicles and the transportation sector is set to increase by around 5% this year. The International Energy Agency expects power demand from data centers to more than double to over 1000 terawatt-hours (TWh) in 2026 from 460 TWh in 2022.
Additionally, emerging trends for making the world carbon-free, President Biden’s intention to boost clean energy in the United States, and Europe and China’s keen efforts to spread clean energy over the long run will further fuel copper demand.
On the other hand, the copper market is tightening. Chinese copper smelters have initiated production cuts of 5-10% in response to a substantial decrease in treatment and refining charges. China’s government also made plans to regulate capacity expansion further by imposing stricter criteria for new smelter constructions, marking a significant shift toward capacity control, similar to measures already in place for other industries such as aluminum and oil refining.
Meanwhile, the International Copper Study Group has slashed its supply surplus forecasts for the metal this year due to a slower-than-expected ramp-up of production, delays in project commissioning and revised output guidance from major producers. Copper production is now expected to grow 0.5% compared with the previous estimate of 3.7%.
Backwardation: A Bullish Sign
The short squeeze pushed the copper futures market into its biggest-ever backwardation (where later-dated contracts are cheaper than near-term contracts). This signals that the copper market is tightening and demand is robust, paving the way for a copper rally.
Short-squeeze rallies typically occur in commodities markets as loss-making traders are forced to exit positions under pressure from ballooning margin calls or the threat of having to deliver physical material — or pay a big rollover fee — when the contract reaches expiry.
ETFs to Tap
United States Copper Index Fund (CPER - Free Report)
United States Copper Index Fund seeks to track the performance of the SummerHaven Copper Index Total Return. The index is designed to reflect the performance of the investment returns from a portfolio of copper futures contracts on the COMEX exchange.
United States Copper Index Fund has accumulated $206.2 million in its asset base and charges 97 bps in annual fees. It trades in an average volume of 65,000 shares a day and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: April Emerges as Worst Month of 2024: Best ETF Areas).
Global X Copper Miners ETF (COPX - Free Report)
Global X Copper Miners ETF offers global access to a basket of companies involved in the mining of copper. It tracks the Solactive Global Copper Miners Total Return Index and holds 40 stocks in its basket. Canadian firms take the largest share at 36.4%, while the United States and China round off the next two spots.
Global X Copper Miners ETF has managed $2.4 billion in its asset base while charging 65 bps in fees per year. It trades in a good volume of 1.2 million shares a day on average (read: Copper ETF Hits New 52-Week High).
Sprott Copper Miners ETF (COPP - Free Report)
Sprott Copper Miners ETF is the only pure-play ETF focused on large-, mid- and small-cap copper mining companies that are providing a critical mineral necessary for the clean energy transition. It follows the Nasdaq Sprott Copper Miners Index and holds 40 stocks in its basket. Canadian firms take the largest share at 33.4%, followed by the United States (33.1%) and Chile (10.4%).
Sprott Copper Miners ETF has accumulated $24.6 million in its asset base since its inception in March and trades in a lower volume of 42,000 shares. It charges 65 bps in annual fees.
iShares Copper and Metals Mining ETF (ICOP - Free Report)
iShares Copper and Metals Mining ETF offers exposure to 35 global copper and metal ore miners who may benefit from increased demand for this limited resource. It follows the STOXX Global Copper and Metals Mining Index, charging investors 47 bps in annual fees. Here again, Canada takes the lion's share at 32.9%, followed by the United Kingdom (15.2%) and Australia (11.1%).
iShares Copper and Metals Mining ETF has gathered only $17.7 million in its asset base and trades in a lower average volume of 22,000 shares a day (read: Mining ETFs Win in Turbulent April With Double-Digit Gains).
Sprott Junior Copper Miners ETF (COPJ - Free Report)
Sprott Junior Copper Miners ETF is the only pure-play ETF focused on small copper miners, selected for their potential for significant revenue and asset growth by tracking the Nasdaq Sprott Junior Copper Miners Index. It holds 40 stocks in its basket, with Canadian firms taking the largest share at 51.2%. Australia and Peru round off the next two spots.
Sprott Junior Copper Miners ETF has AUM of $10.7 million and trades in a lower average daily volume of 12,000 shares. It charges 75 bps in annual fees and expenses.