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5 Stocks to Watch as Copper Prices Hit Nine-Year High

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Kaustav Ghosh
·5 min read
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The outbreak of the COVID-19 pandemic last year put a break on demand for copper and in turn, moved copper prices lower, as production was halted across parts of the globe to maintain social distancing measures and limit the spread of the virus. Nonetheless, the gradual reopening of economies and resumption of business activities helped copper prices to recover. Moreover, the ramp-up in vaccination drive across major economies and fiscal stimulus aid in countries like the United States have provided further support to the industrial metal.

Reflective of these, the manufacturing indexes in major economies have continued their expansion. Notably, the U.S. manufacturing purchasing managers’ index (“PMI”) has maintained its growth path, following the slump in April and May last year. Per the latest report by the Institute for Supply Management, the manufacturing PMI came in at 64.7% in March, marking the tenth consecutive month of expansion.

Meanwhile, China, which is the largest consumer of copper, has also witnessed its manufacturing activity maintaining expansion. Notably, data from the National Bureau of Statistics showed that China’s manufacturing PMI stood at 51.9% in March, marking its thirteenth successive month of increase, as quoted in a Global Times article. The Eurozone’s manufacturing activity also witnessed the largest month-over-month improvement in March in nearly 24 years, as quoted in an Argus Media article. Notably, the article stated that the IHS Markit Manufacturing PMI was recorded at 62.5% in March compared to 57.9% in February.

Copper Prices Post Their Highest Finish in More Than Nine Years

In fact, copper prices have been edging up lately and on Apr 23, copper future prices posted the highest finish in more than nine years, as cited in a MarketWatch article. The article stated that the May copper futures contract rose 1.5% to close at $4.336 a pound on COMEX, and marked the highest settlement since August 2011. Moreover, prices rose around 4% during the week ending Apr 23, registering the third successive weekly rise.

Besides the robust increase in manufacturing across the world, the article mentioned that copper prices moved higher due to optimism surrounding President Joe Biden’s infrastructure spending plan of $2.3 trillion in the United States. Moreover, President Biden has consistently emphasized shifting focus to renewables which should also bolster demand for copper, owing to its conductivity qualities. Meanwhile, the rising shift to digitization and dependence on technology is spurring demand for copper as semiconductors and data centers among many others also require the usage of the metal.

Markedly, the global production of copper is also set to increase in 2021 following the COVID-19 led slump last year. Per a report by GlobalData, global copper production is estimated to rise 5.6% in 2021, following the decline of 2.6% in 2020, as mining operations resume fully along with the ramp-up of new mines starting in 2021.

5 Stocks to Watch Out For

Copper prices have edged up lately, thanks to continued expansion in manufacturing as well as President Biden’s focus on pushing up infrastructure spending in the United States and shift to renewables. This makes it a good time to look at copper names that can make the most of this potential going forward. Notably, we have selected five such stocks that carry a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Southern Copper Corporation SCCO engages in mining, exploring, smelting, and refining copper and other minerals. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 23.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 66%.

Rio Tinto Group RIO engages in exploring, mining and processing mineral resources worldwide. The company offers aluminium, copper, diamonds, gold, and so on. It currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 10.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 75.7%.

BHP Group BHP engages in the natural resources business in Australia, Europe, China, North America among others and it operates through Petroleum, Copper, Iron Ore, and Coal segments. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 6.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 79.9%.

Freeport-McMoRan Inc. FCX engages in the mining of mineral properties in North America, South America, and Indonesia and primarily explores for copper, gold, molybdenum, silver, and other metals, as well as oil and gas. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 21.1% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%.

Teck Resources Limited TECK engages in exploring for, acquiring, developing and producing natural resources in Asia, Europe, and North America and operates through Steelmaking Coal, Copper, Zinc, and Energy segments. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 5% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%.

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