The current supply-demand backdrop should set the stage for higher copper prices. In turn, this should feed into more bullish vibes. Traders will continue to place bets on the metal pushing higher and higher as supply gets constrained.
China is the world’s largest consumer of copper. However, demand may be tepid as the country struggles to get its economic house in order. Overshadowing that, however, is the increasing global electrification as the world becomes more increasingly reliant on electricity as an alternative energy source to reduce emissions. In turn, this could strain the global supply chain, thus pushing prices higher amid surging demand.
“Traders are betting on a tighter copper market in coming months, as disappointment over China’s stumbling economic growth is overtaken by fears of a squeeze on global supplies. Copper — a key barometer of global economic health given its use in everything from buildings to power lines — for delivery in June is $8,832 per tonne, $105 more expensive than the spot price,” the Financial Times reported. “The difference between current and future delivery is the largest ever, in records that go back to 1994, according to Bloomberg data.”
In the long-term horizon, copper is an essential component as electricity demand intensifies. In the case of electric vehicles (EVs) and other devices, copper’s conductivity properties are vital. This creates a unique investment opportunity for ETFs focused on the metal.
2 Options for Copper Exposure
While not a direct play on spot prices, miners can offer investors an alternate play, particularly if demand rises. With that, Sprott has a pair of options to consider. One provides broad-based exposure, while the other adds an extra tinge of growth with a focus on small caps.
To get all-encompassing mining exposure, the Sprott Copper Miners ETF (COPP) is an ideal solution. COPP seeks to provide investment results that correspond generally to the total return performance of the Nasdaq Sprott Copper Miners™ Index (NSCOPP™), which is designed to track the performance of a selection of global securities in the industry, including producers, developers and explorers. As mentioned, COPP provides blanket exposure to the copper mining industry, focusing on large-, mid-, and small-cap mining companies.
Investors who want to focus on even more aggressive growth prospects will want to consider the Sprott Junior Copper Miners ETF (COPJ). The fund seeks to provide investment results that track the total return performance of the Nasdaq Sprott Junior Copper Miners Index. The index incorporates mid-, small-, and micro-cap companies entrenched in copper-mining-related businesses.
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