The copper element is becoming one of the most sought-after commodities in the investment world, specifically on the Australian Stock Exchange (ASX). Copper is known as one of the strongest conductors in the periodic table and proves its worth by being a prominent element used in electrical equipment. Critical apparatus like wiring and motors (electrical), roofing and plumbing setup (construction), and heavy machinery (industrial) all comprise this essential metal. So, it is safe to say that copper is a ubiquitous metal both domestically and in the industry.
Since, the revolutionary shift towards green energy industries, especially with the emergence of electric vehicles (EVs), the demand for copper only seems to rise in the global market. Along with that, numerous companies are now looking forward to expanding their consumer outreach. This effort involves infrastructural development to attract investors. With such valuable and lucrative opportunities being opened to the copper market, it is expected that this metal will become the next big commodity. With this unparalleled growth, even investors will move towards copper-based stocks on the ASX.
Demand for Copper
Copper/Cuprum (in Latin), is a resourceful element for a lot of good reasons. The metal plays a crucial role in enhancing many modern technologies and it proves to be essential for global economic growth.
Here are some viable reasons to consider to understand the demand for copper:
Electric Vehicle Revolution
The world is looking up to a potential shift to the electric vehicle market. It is also true that people still heavily rely on fossil fuels, but this green revolution is expected to change that dependence, thereby forming a sustainable environment. Copper is a critical component in the making of EVs. An EV uses nearly four times the quantity of copper compared to a traditional fuel-powered car. According to the International Energy Agency (IEA), the number of electric vehicles on the road is expected to reach 145 million by 2030. This will drive the enormous demand for copper in the coming years.
Renewable Energy Infrastructure
This versatile element is also a significant contributor to building renewable energy systems like wind turbines, solar panels, and power grids. Copper as a metal has excellent conductivity, durability, and recyclability making it ideal for the process of wiring in these systems. Globally, every country is adapting to this need for renewable energy. The price of copper stocks will reach a new height considering these factors.
Rapid Urbanization
Certain countries like China and India are undergoing an infrastructural development phase which will only drive up the need for copper. These nations are increasingly focused on integrating their existing structures. This includes electrical wiring, plumbing, roofing processes, and more. All these factors make copper an indispensable metal for modern infrastructure.
Supply of copper
The imbalance of a commodity will occur if the supply exceeds the demand or vice versa. Since the need for copper is growing, the supply aspect faces challenges. Many of the renowned copper mines in the world are aging. For example, Chile’s Escondida mine, the world’s largest copper producer, and other major mines in Peru are reaching the end of their life cycles. New projects are sedated, creating an imbalance. This is expected to push copper prices higher, thus making it a promising commodity.
Telecommunications
There is a notable rise in data centers, 5 G-related projects, and cloud computing. Copper is an important element that is used in communication networks. In the name of improving such infrastructure, copper is the underlying metal used to develop telecommunication cables to enhance data transmission.
The Top 2 ASX-listed Copper Stocks to Watch
There are many copper-based stocks listed on the ASX that stand to benefit from the ongoing demand for copper:
BHP Group (ASX: BHP)
The BHP Group exhibits a strong copper portfolio as their services primarily consist of copper extraction and production. They operate some of the major copper mines in Chile, including Escondida, and other regions worldwide. With the diversification offered by the BHP Group and their spotlight on copper mining projects, they also give broader exposure to investors looking to understand more about the copper market.
Sandfire Resources (ASX: SFR)
This is another leading copper mining company listed on the ASX. Its flagship project, the DeGrussa Copper-Gold mine in Western Australia, has been a significant copper producer throughout the years. Sandfire is focused on expanding its copper production through various international projects. One notable project is the Motheo Copper Mine in Botswana, which strengthens Sandfire’s global footprint and makes it a key player in the international copper supply chain.
Why Copper Could Be the Next Big Commodity?
Copper is present in the smallest pieces of domestic wiring to huge machinery operating in industries. There are numerous reasons why copper can transform itself into the next biggest commodity, thereby fueling the copper-based shares in the market. Individual countries and the supply chain of copper globally all stand to gain from the demand for copper.
With primary factors like the production of electric vehicles and the shift to the renewable energy sector, copper plays a crucial role in energy storage solutions. Beyond this, various infrastructural projects are underway through which companies are likely to expand their markets. So, it is essential to note that this metal is extremely multi-faceted, thereby fulfilling the demand in every aspect.
How to Invest in ASX-listed Copper Stocks
Know these simple steps about investing on ASX:
- Create an investment plan considering the brokerage account (broker fees) and individual stock price comparison.
- Investors can make informed investment decisions after seriously considering the trends in the copper market and choosing their preferred copper-based shares.
- Analyze the market capitalization of the companies listed on the ASX.
- Make sure to watch out for the dividends payout of the company to estimate investor’s revenue from the copper-based shares.
Future Outlook of ASX
There is a promising future waiting for copper as it is driven by different technological and infrastructural advancements. There is a constant global push towards a more sustainable future. According to the International Copper Study Group (ICSG), the global copper demand is expected to rise by a margin of 2.5% annually. This will cause a significant height of 28.5 million tonnes by 2030.
The supply of copper, however, may struggle to keep up with this increase. As major mines like Escondida approach the end of their life cycles, and no large-scale replacements come online quickly enough, the risk of a potential copper deficit increases. Unless companies find a viable way to stay relevant and meet the demand for copper, a potential shortage in the market is possible.
Conclusion
With the global supply of copper expected to squeeze into lower rates, the copper prices as a result, may continue to rise. This will put the metal of Copper as the next big commodity on the ASX. The sector of copper shows a promising investment despite of whether it is through direct individual investment in copper shares or ETFs. This is an ideal opportunity for investors looking to learn more about the copper industry and capitalize on the global transition to a greener future.
What are the Best ASX Copper Stocks to invest in right now?
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