How To Invest In Copper – Forbes Advisor UK

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Investing in copper offers exposure to an industrial metal set to play a pivotal role in the transition to clean energy and net zero emissions by 2050.

Commodities such as copper can enhance the stability and diversification of an investment portfolio, particularly against the current backdrop of economic and geopolitical uncertainty. According to Statista, copper also boasts the third largest market by value globally among its fellow commodities, behind only gold and aluminium.

However, as with other metals, copper prices can be volatile and are highly dependent on the health of the wider economy, which can reduce their effectiveness as a hedge against equities. And overexposure to a single commodity can add to, rather than reduce, the risk profile of an investment portfolio.

To help investors navigate the options on offer, we take a closer look at investing in copper and the outlook for the sector.

Note that copper is priced in US dollars. For example, we quote the price per tonne as ranging from $4,600 to $11,300. The sterling equivalents using the November 2023 $ to £ exchange rate are £3,740 and £9,820.

What is copper used for?

Copper is in high demand due to its excellent thermal and electrical conductivity, resistance to corrosion and malleability.

Some of the main industrial applications for copper include:

• electrical and plumbing components
• components in circuit boards, semiconductor chips and wiring in consumer electronic devices such as mobile phones and computers
• construction, including heating and ventilation systems
• transportation, such as radiators, brake systems and other components for the automotive and aerospace industries
• generation and distribution of electricity from renewable energy sources such as solar panels and wind turbines
• industrial machinery and equipment.

Looking at demand by end-user, equipment and construction account for 60% of copper consumed globally, as shown in the chart below:

However, clean energy technologies are forecast to become the fastest-growing segment moving forward, with the International Energy (IEA) predicting that their share will increase to 40% of demand by 2040.

How has copper’s price performed?

Copper prices more than doubled during the pandemic, rising from a low of $4,600 per tonne in early 2020 to a high of almost $11,300 in 2021. One of the key drivers was increased demand from China, with deteriorating trade relations with the US prompting its stockpiling of copper supplies.

However, a surplus in copper supply has proved a headwind for copper prices over the last year, driving down the price to around $8,000 per tonne, as shown in the chart below:

Russ Mould, investment director at AJ Bell, comments: “At around $8,000 a tonne, copper is no higher now than in early 2021 (or for that matter 2011 and 2006). 

“Those who view the glass as half-empty will shrug and point to the risk of weak demand from China, as its economy goes through a potentially lengthy adjustment process.

“However, those who view the glass as half-full will argue this is comfortably above the 2020 Covid low of $4,600 and the summer 2022 trough of $7,100, when recession fears were rampant, and assert that long-term demand for copper is underpinned by future economic growth prospects.”

Why invest in copper?

One of the key benefits of investing in copper is its importance in a range of industrial processes, as well as the move…