Considering that $ 4 / lb turf is to be breached by Copper in 2013, it is the copper mining companies and their related funds thathave become more attractive than the base metal itself. Considering that the average cash cost incurred by the miners has been around $ 1.5/lb – $ 2/lb of copper since 2011, investors who are engaged with copper minersequity or global copper ETFs are more favourably placed than the ones dependant on the physical metal.Most Copper Miners worldwide have been beating the street figures year on year due to their healthy profit margins as for the last nine years or so the metal has maintained a minimum market price of minimum $ 3/ lb during this period and has never even once plunged further.
Copper is the most indispensable industrial metal. It is an elementary requirement for the building and construction industry thus its demand is a strong driver as well as a fair indicator of the housing sector and its growth. Applied uses of the metal in Wiring and Plumbing are the biggest demand growers and it is also a vital component of auto parts such as brakes and cooling systems. In fact Copper being a true base metal, its industrial uses are far more widespread than most industrial metals although the same can’t be said for its popularity among investors, who in majority are interested in silver and gold vehicles owing to their high risk-high reward nature.
Majority of copper supply comes from the emerging nations such as Chile (accounting for 20% of the metal’s reserves in the world) and China. Next in line are two more big producers of the copper metal namely Peru and the United States.
Many investors looking to play this metal consider options such as Exchange traded funds (ETFS), Futures, Bullion and Stocks.
While Futures could turn out to be a complex investment tool for an average investor as it is difficult to comprehend the intricate futures contracts, stocks provide an interesting opportunity for gaining exposure to this commodity. Equities concentrating on metals most often include companies involved in mining, exploration and refining work. Such companies are in sync with all kinds of traders and many of them provide decent dividends and liquidity potentials.
A broader market offering such as the Copper equity traded funds enable participants to acquire a balanced exposure on the metal and at the same time simplifying the asset for foreign investors with maximum liquidity and with easy approachability on part of investors. These ETFs that attune to the performance of the Global Copper Miners benchmark, charge annually as per 65 basis points, but the asset kitty makes up for more than that. The key sector players like Southern Copper Corp. and Polska Miedz are among the heaviest equities that dominate the index along with the likes of Hudbay Minerals and Inmet Mining. Interestingly, companies like Vedanta Resources and Jiangxi copper mining companies that have a close to 5% each weight age on the index provide investors a direct pie from the India and China side of the BRIC.
The slowing economic growth in China has led to concerns over the success of industrial metals in the minds of investors as it is the largest producer and consumer of copper. But the global growth has begun to improve with inspiring developments in United States and European crisis is on a dissolving mode, therefore copper has been attracting individual interest and a near term rally that may very well replicate the gains of 2010 cannot be ruled out.