Where to invest as data centres turn copper into a hot commodity

Article content

Article content

Picks and Shovels

Article content

Another way for ordinary investors to benefit from higher copper prices is through the companies that dig it out of the ground. When copper prices rise, miners can enjoy an amplified benefit: The price they receive for their product increases, while some of their costs don’t rise nearly as quickly.

Article content

For individuals comfortable with single-stock holdings, Freeport-McMoRan Inc. provides significant copper exposure with large-scale operations, Lapp said. But it also exposes investors to considerable operational and geopolitical challenges, with operations in Indonesia, United States, Peru, Chile and Spain. Southern Copper Corp. is another established producer, but it brings jurisdictional and controlling-shareholder risks, he said.

Article content

Outside of the U.S., Barclays strategists, including Hannah Greenberg, identified Antofagasta PLC, First Quantum Minerals Ltd. and Anglo American PLC as copper mining companies that are best positioned in the next two years to benefit from the AI boom.

Article content

Mike Casey, president at American Executive Advisors, also favours financially strong, diversified producers rather than smaller mining companies with limited financial resources. The Solactive Global Copper Miners Index, which includes international companies active in the exploration, mining and refining of copper, has gained about 35 per cent since the start of the year.

Article content

Article content

Article content

And the opportunities aren’t limited to companies pulling copper out of the ground.

Article content

An emerging source of  demand for copper comes from the highly conductive metal’s essential role in AI data centre buildouts. So another way is to invest in companies that make mining equipment and components for electric grids, as well as the utilities and renewable energy producers along the copper supply chain, said Jeff Judge, managing partner at Chesapeake Financial Planners. He has started pointing clients toward the broader infrastructure angle and companies such as Eaton Corp., Vertiv Holdings Co. and Quanta Services Inc.

Article content

“It’s a more diversified way to ride the theme,” he said. “Buy the story, not the ticker.”

Article content

Article content

Spread Your Bets

Article content

A mine can flood. A government can change the rules. A new project can cost far more than expected. On top of that, labour strikes, cost overruns, currency moves, political intervention and management mistakes can all hurt a mining company’s shares even when the commodity itself is doing well. So for many financial advisers, investing in a diversified copper or mining fund is the preferable approach.

Article content

Article content

“Single-name mining risk can wipe out the copper thesis overnight,“ Judge said, adding that he never recommends individual mining stocks as a core holding. “A broad materials or copper-focused ETF is the right entry point for almost everyone. It gives you the theme without betting on one CEO’s execution.”

Article content

That’s where the Global X Copper Miners ETF (COPX) comes in. Holding about 40 copper mining companies and with an expense ratio of 0.65 per cent, the fund has total assets of US$8.7 billion, meaning it has ample liquidity. The iShares Copper and Metals Mining ETF (ICOP) offers similar global exposure with a lower 0.47 per cent expense ratio, but it is smaller and less liquid.

Article content

Another rule of thumb Judge uses: If you can’t explain why a particular company should outperform its competitors, you probably don’t have a reason to own it instead of a fund.

Article content

There is also an important difference in time horizon. Exposure through copper ETFs or futures contracts is likely to require closer attention to inventories, Chinese demand and monetary policy, and may make more sense as a six-to-18-month position, Katz said. Investors can typically hold copper miners and mining ETFs for about 12 months to 36 months, while electrical equipment, grid and infrastructure companies may warrant a three-to-five-year holding period.

Article content

Financial advisers may wince reading this next idea, but investors willing to take an even more speculative approach can wager on copper through prediction markets. Kalshi offers short-dated contracts tied to whether copper will close above a specific price level at a particular time, with daily, weekly and monthly copper markets available. Polymarket offers similar markets, as well as event-driven bets connected to the industry, including whether copper cable will face certain tariffs by specific dates.

Article content

Article content

Article content