Copper Concept Stocks Investment Guide for the Second Half of the Year: Are These 5 Stocks Worth Watching?

Copper prices have surged fiercely over the past two months, with the stock price of the global copper giant Freeport-McMoRan (FCX) soaring 30% in just a month and a half. What is the underlying logic behind this market movement? For investors, do copper concept stocks still have investment potential?

Why Do Copper Prices and Copper Concept Stocks Rise Simultaneously?

First, the conclusion: Copper concept stocks and copper prices generally fluctuate in sync.

The reason is simple. The main products of copper mining companies are copper ore and electrolytic copper. When copper prices move, their performance follows. It’s like running a gas station—when oil prices rise, you earn more; when oil prices fall, your earnings decrease. Same logic.

Looking at the chart of copper mining ETFs (COPX) and LME copper prices reveals that the two lines almost move in unison—when copper prices go up, copper concept stocks rise; when copper prices face pressure, copper stocks are dragged down. This positive correlation is very obvious, and it’s hard to manipulate artificially because it directly reflects how commodity prices impact corporate profits.

Understanding the Copper Industry Chain Is Key

Investors in copper concept stocks often overlook a crucial issue: Companies at different points in the copper industry chain respond very differently to rising copper prices.

The copper industry chain can be divided into three layers from upstream to downstream:

Upstream Mining and Beneficiation: Copper mining companies. Copper is their main product; when copper prices rise, they make big money. The top ten global copper mining companies include Freeport-McMoRan, Chile’s Codelco, BHP, Glencore, Southern Copper (SCCO), among others. The upstream industry is highly concentrated, with obvious oligopoly effects, and profits are relatively centralized.

Midstream Smelting: Companies that smelt copper ore into refined copper. These companies are more passive—regardless of copper price movements, they must operate. They mainly earn from smelting fees (TC fees). When copper prices rise, their impact is limited; when prices fall, they are not severely hurt. Currently, TC fees are low, indicating moderate profitability for smelting companies. Therefore, if you want to invest in copper concept stocks, midstream companies are not the best choice.

Downstream Processing and Application: Manufacturers of wires, cables, and copper foil. These companies are at a disadvantage—copper is their cost component. When copper prices rise, their raw material costs increase, squeezing profits. Companies like First Copper (2009) and HuaRong (1608) in Taiwan fall into this layer. When copper prices go up, they usually face pressure.

Why Are Copper Prices Still Rising in 2024? Three Main Supports

Copper prices and copper concept stocks in 2024 are not just a flash in the pan—they are supported by fundamental factors:

First, supply has a ceiling. Over the past decade, global copper mining capital expenditure has been relatively low, leading to sluggish capacity expansion. New production is limited and difficult to release significantly in the short term.

Second, demand continues to grow. Under carbon neutrality goals, investments in power grid infrastructure are increasing. Building power grids requires大量 copper cables. This is a long-term incremental demand.

Third, AI computing power investment becomes a new engine. The explosive popularity of AI applications like ChatGPT requires massive computing centers and electrical infrastructure, which demand huge amounts of copper. This is a new variable in 2024—an unexpected growth point that analysts may not have fully anticipated.

Overall, limited supply growth combined with accelerating demand creates a favorable mismatch for copper prices. It is expected that for the rest of 2024, the supply and demand relationship for copper will remain relatively tight.

How to Choose Leading International Copper Concept Stocks?

For upstream copper mining stocks, these three companies are worth close attention:

Freeport-McMoRan (FCX): Undoubtedly the leader among international copper concept stocks. Engaged in copper, gold, and molybdenum mining, with a strong focus on copper, making it the purest copper concept stock. Founded in 1987, headquartered in Arizona, with one of the highest global outputs.

Glencore: A large diversified mining company involved in metals, minerals, and energy. Copper is just one segment but an important one. During global resource booms, this company tends to perform steadily.

BHP: An Australian mining giant with iron ore, coal, copper, and other minerals. From a pure copper perspective, it’s less focused than FCX, but as a top global miner, risks are more diversified.

Opportunities in Copper Concept Stocks in Taiwan Stock Market?

First Copper (2009) and HuaRong (1608) are the most well-known copper concept stocks in Taiwan. But note—they are both in the downstream part of the industry chain.

What does this mean? It means that when copper prices rise, as raw material purchasers, their costs increase. While short-term order volume might grow, profit margins tend to be compressed. From this perspective, their investment logic is opposite to upstream copper miners.

Short-term Risks, Long-term Outlook Depends on Economic Cycles

Honestly, the recent gains in copper prices and many copper concept stocks are quite substantial, and a correction is likely in the short term. If you are optimistic about this sector, rather than chasing high, it’s better to wait for a better entry point.

For the medium to long term, keep an eye on the global economic cycle. Carbon neutrality and AI computing demand are long-term positives, but macroeconomic cycles are the bigger variables.

If in the second half of 2024 the Federal Reserve continues to maintain high interest rates or even hikes, it will suppress global demand, which is negative for cyclical commodities like copper. By then, even with strong fundamentals, copper concept stocks’ prices could be dragged down.

Therefore, the investment strategy should be: buy and hold during economic upswings, and be cautious when signs of economic peak appear.

How to Invest? Several Approaches

Buying individual stocks is straightforward, but you can also consider:

• Copper Concept Stock ETFs: such as COPX, which provide exposure to multiple copper companies at once, reducing company-specific risk.
• Copper Futures or CFDs: These instruments have low trading costs and high efficiency, suitable for short-term traders.

When choosing a broker, remember to check the minimum deposit, whether they support local currency deposits/withdrawals, and the variety of trading products offered—these factors influence your trading experience.

Final Words

Copper is never just a commodity topic; it represents the global economic cycle and energy transition trends. In 2024, looking at copper is really about two big directions: one is energy greening, and the other is the AI wave.

But don’t get carried away by short-term surges. Wait for corrections, choose good entry points, and manage risks—this is the right approach when dealing with copper concept stocks.