Copper’s exceptional electrical conductivity and its role in energy efficiency make it a crucial resource. With global economies ramping up their clean energy activities, copper’s importance has been magnified in the context of supply chains disrupted by geopolitical events. For investors, this presents an opportunity to gain exposure to a resource that could continue to rise in economic significance over time.
As the quintessential metal for electrical conductivity, copper is indispensable in every electrical grid, power source, and electronic product. The global shift towards clean energy technologies, including wind, solar, geothermal, and nuclear energy, has significantly increased the demand for copper. Its broad market demand and versatility across various industries have historically positioned copper’s price as a gauge of the global economy. Copper’s role as an economic bellwether is well-established, with price increases often reflecting improved business conditions. Despite current interest rates being above historical averages, past trends suggest that rate reductions in a non-recessionary environment often lead to higher commodity prices, with copper benefiting the most.
Recently, copper prices have crossed the $10,000 per ton threshold, driven by projections of tightening global supplies and increased demand from the electric vehicle and power sectors, even as demand from China weakens. Economic insights from Sprott suggest copper may be entering a supercycle, defined as a sustained period of expansion driven by robust growth in demand for products and services. Such supercycles produce strong, sustained demand for raw and manufactured materials, often exceeding what commodity producers can supply. These periods of growth are also beneficial for stock prices, particularly in the commodity markets.
Copper is predominantly a long-cycle commodity, with the process from discovery to production averaging 16.5 years. This long lead time, coupled with the mining sector’s reluctance to invest in new projects, places the copper market in a precarious position regarding the necessary supply to meet future demand. As demand for copper continues to grow, significant price appreciation is possible if producers cannot provide sufficient supply in the medium to long term. This scenario also suggests long-term growth potential for copper miners.
Investment avenues such as the Sprott Copper Miners ETF (NASDAQ: COPP) and the Sprott Junior Copper Miners ETF (NASDAQ: COPJ) offer pure-play exposure to a broad range of copper miners poised to capitalize on increased demand. While COPP provides comprehensive exposure across large, mid, and small-cap companies, COPJ focuses on small copper miners with significant growth potential.
Earlier this month, Sprott launched an at-the-market equity program to issue up to an additional $500 million of trust units via its Sprott Physical Copper Trust (TSX: COP.UN), touted as the world’s first physical copper investment vehicle. Created in June 2024, the closed-ended trust invests and holds all its assets in physical copper metal.
Copper remains a critical material in meeting global energy requirements and building clean energy infrastructure, offering long-term investment potential for both the metal and its miners.
