Last Updated on January 20, 2025
You can invest in copper through physical bullion, mining stocks, ETFs or futures.
By doing so, you will be engaging in an ancient human activity.
Copper was one of the first metals that humans ever extracted from the earth.
Copper, and copper mining, goes back to near the dawn of civilization.
The archaeological record dates copper’s first use to about 8000BC. In about 3000BC copper was alloyed with tin to produce bronze, ushering in the Bronze age.
Money was one of the first uses of copper but it also has a wide range of other uses. In the ancient world it was used for ornaments, tools as well as for food and drinking vessels.
Copper was not as well suited to the function of money as gold or silver and the latter two eventually displaced it as money in the ancient world.
Read More: The History of Gold
Read More: The History of Silver
However, in the modern world, copper has a myriad of domestic and industrial uses and we encounter it every single day. It is even in our bloodstream and without it we would die.
As the world progresses into a high tech, electrified future, the need for copper is going to increase drastically.
Investing in copper means being bullish on the long term development of industrial civilization.
A Brief History of Copper
Copper has a very long history, with the first use by man over 10,000 years ago.
The oldest copper artefact known to man is a pendant found in Northern Iraq that has been dated to around 8700BC.
At first, copper was primarily used for ornaments, but with the development of metallurgy in 4500-5000BC, the range of uses for copper expanded.
Copper is a soft metal and is easily stretched and shaped. This makes it ideal for many industrial uses in the modern age, but in the ancient world it meant that it had limited use as a weapon or a tool.
However, it was eventually discovered that copper could be alloyed with tin to form bronze, making it harder and therefore much more useful.
A bronze coin called an aes was used in the early Roman Republic.
It was the standard that the famous Roman denarius was based on. Denarius means ten asses.
As well as money the ancients also used copper or copper alloys for things such as:
- Jewellery
- Plates
- Cups
- Pots
- Chisels
- Razors
- Arrows
- Spearheads
The early Mesopotamians mined their copper in Armenia. A major copper discovery occurred on Cyprus in 2600BC and it became the most significant supplier for the Egyptian, Greek and Roman empires.
Given its critical importance, having a reliable supply of copper was an imperative for any empire who wished to hold onto power.
Things haven’t really changed in the modern world. As America grew as a nation, so did the need for copper. Not for weapons and tools, but for electrification. Supplied by mines primarily in Arizona, thousands of miles of copper wire allowed for the widespread adoption of electricity in the late 19th and early 20th century.
Today copper is going to be needed in abundant quantities if the world is to have any chance of making the shift from fossil fuels to a clean green electrified future.
What Is Copper Used For Today?
Copper has a number of properties that make it suitable for a wide range of uses in modern industrial society. It is:
- Easily shaped
- Does not decay or rust
- Conducts heat
- Conducts electricity
As Bill Carter describes it in Boom, Bust, Boom: A Story About Copper, the Metal That Runs the World:
“Copper has proven itself the perfect metal. In metallurgy, the scientific study of metals, copper is known as the eternal metal for a simple reason. It does not decay or rust. Easy to recycle, almost 80 percent of all copper ever extracted from the earth is still in use in some way or another. Copper is also malleable, allowing for expansion and contraction under great tension and heat. It softens when rubbed and hardens when hammered. Such flexibility allows metalworkers and plumbers to work copper into any particular shape without ever losing its chemical integrity.”
These properties mean copper is used in a wide range of things such as:
- Building construction
- Electrical wiring
- Pipes
- Generators and motors
- TVs, computers and radios
- Home appliances
- Vehicles
Copper’s importance to industrial society means it is a leading indicator of economic growth or decline. As the economy expands, demand for copper increases and so does the price.
The reverse is also true. When the economy contracts, demand for copper shrinks and so does its price.
Bill Carter explains:
“Eventually copper became such an important part of modern society that Wall Street began to call the mineral “Dr. Copper,” implying that the stock market invariably followed the ups and downs of the price of copper. When copper is up, the economy must be expanding, as industry uses more copper to build buildings, cars, and infrastructure. And when the price of copper takes a dive, it means the industries that drive economic growth are slowing down.”
Where Is The World’s Copper Produced?
In modern history, up until the year 2000, the United States was the world’s largest producer of copper.
In the US, Arizona is the most significant producer, with Michigan, Missouri, Montana, Nevada, New Mexico, and Utah also contributing to the supply.
There are also significant copper deposits in South America. In 2000, Chile overtook the United States as the world’s leading producer.
By 2007, the Andes mountains accounted for 45% of the world’s copper supply, with the US supplying only 8%.
South America’s status as the leading supplier of copper is concerning because of the jurisdictional risk that exists there. Political trends are moving strongly in the direction of anti-mining policies, which will have corresponding impacts on supply and price.
Expert resource investor Marin Katusa describes the situation:
“In many places around the world, governments would rather
- Raise taxes and even nationalize the mine,
- Seize control of it, and
- Run it poorly
…Versus assume a minority stake and let a world-class operator run the mine.
In Chile and Peru, we have seen major fights between governments, unions, and mining companies.
These governments want to increase their takes of revenue from mining either through increased direct ownership or through higher taxes and royalties. And they will.”
As an investor it means you want to take jurisdictional risk into account if you are buying shares in mining companies.
This, along with the general volatility risks that come with commodities are the key risks to be aware of when investing in copper or copper miners.
Correspondingly, mining companies in stable jurisdictions become more attractive if there happened to be supply shocks in Chile or Peru.
Why Invest in Copper
There are three significant reasons to invest in copper:
- Large amounts of infrastructure spending
- Decarbonization trends
- Protection from economic collapse
The developed world has aging infrastructure and plans for significant upgrades over the coming decades. Developing economies are still building up their infrastructure and will be significant drivers of economic growth throughout the rest of this century. All of this requires copper.
The existing trend away from fossil fuels, away from carbon and towards electrification is only going to accelerate in the medium term future. Regardless of whether you agree with it or not, this is a trend that is impossible to ignore. The only way this future is possible is with key metals such as lithium, silver and, of course, copper.
Large diversified miner BHP gives their reason for mining copper:
“We believe the demand for copper will grow due to grade declines at existing copper mines, the radical urbanisation of large populations in China and India and the electrification of energy and transportation. Renewable energy sources, such as wind and solar, also require copper for their infrastructure.”
Copper initially may seem like an odd choice as protection from economic collapse. After all, Dr Copper is a leading indicator of a market downturn and will have plunged before you even realise that the economy is in trouble.
But in a serious, serious collapse situation, where the whole world falls about, copper use will survive.
Remember, copper was mankind’s first metal. It is a very cheap conductor of electricity. If high tech industrial civilization starts falling apart and we regress, like the Romans into the Dark Ages, copper use will still survive.
As Bill Carter says:
“There is another theory of the future of the world economy, which is that it is in the beginning stages of an ultimate collapse, or at least a dramatic paradigm shift. This means that all this talk of supply and demand of metals and money will be dwarfed by the need for more basic items, such as food. If this is true, will copper really matter? I believe the answer is yes. The most perfect conductors of electricity are gold and platinum, but they are too expensive to use commercially and most likely always will be. If the markets collapse and the model of world economic expansion has reached its limits, I doubt there will be a lack of a need for copper, unless of course everything collapses to the point of complete anarchy.”
How To Invest In Copper
The ways to invest in copper are:
- Bullion
- Copper Miners
- Diversified Miners
- ETFs
- Futures
Bullion
Copper bullion can be purchased in much the same way as you can purchase gold and silver – either in coins or in bars.
It’s not so common to buy bullion now, since copper no longer has any status as money. But this is a way to get pure exposure to the price of the metal with no counterparty risk.
Copper Miners
Copper mining companies are a good way to get leveraged exposure to the price of copper. While the share price of a mining company is determined by a range of things, the copper price is obviously the primary driving factor.
When the price of copper rises, a copper mining company should see its share price rise by a significant magnitude greater than the spot price. The converse is also true. When the copper price is falling, the mining companies will likely fall by a greater magnitude.
If you can buy shares in a high quality copper miner when the economy is just coming out of a downturn, you can potentially do very well in the following economic expansion.
Diversified Miners
Significant amounts of the world’s copper is not produced by pure play producers but by large diversified miners such as Rio Tinto and BHP.
Buying shares in these companies will give you an exposure to the copper price, however that exposure will be diluted by all the other activity those companies are involved in.
However, that also gives you some protection on the downside, as the companies are not solely dependent on strong copper prices.
ETFs
Exchange traded funds (ETF) are a great way to get exposure to copper from your brokerage account, without taking on company specific risk.
The Global X Copper Miners ETF (COPX) gives you exposure to a basket of copper mining companies.
The United States Copper Index Fund (CPER) is an ETF that reflects the performance of a portfolio of copper futures contracts.
Futures
Copper futures are an alternative mechanism of investing in copper for advanced traders.
A standard futures contract is for 25,000 lbs and is primarily traded on the London Metals Exchange (LME) and the New York Commodity Exchange (COMEX).
Bill Carter explains the purpose of copper futures:
“These contracts are legally binding obligations for the buyer of the contract to pay a set price upon delivery, which the LME has established as three months from the day it is traded. Referred to by the LME as the “three-month buyer price,” this is the price of one metric ton of the metal delivered in three months’ time. This lag between purchasing and delivering came about after the Suez Canal opened in 1869. With the invention of the telegraph and steamboats, the delivery time for copper became a more exact science. Members of the ring settled upon three months, the delivery time of copper from Chile, already a major producer by that time, to London. By locking in a price, copper merchants could eliminate the risk of spot prices of copper being higher than when they ordered it three months prior. This simple financial tool, still in use today, allows businesses to have some known stability in their copper supplies.”
While futures contracts were designed for merchants to eliminate risk and provide stability, they are also used for speculation:
“Once the LME sets the global spot price, stock traders in Toronto, Chicago, Brazil, India, and Tokyo will begin trading their own lots of copper and also begin speculating on the rise and fall of the prices set at the LME. These traders are hoping to profit by gambling on whether the price of copper set by the LME will rise or fall by the end of the hour, day, or week, depending on the transaction. Often they are not actually dealing with physical copper, only its speculative price. They buy and sell their shares long before any copper would be due.”
Conclusion
Copper is the oldest metal that humanity has mined and has been a key player in both the ancient and the modern world.
At times, it has even been a monetary metal.
As the world looks to move to a new era of high tech electrified industrialisation, copper is going to be in demand more than ever before.
Exposure to copper is exposure to the long term success of industrial development. However, in the short term, copper is a leading indicator of economic strength and weakness. A range of options exist for the investor looking for exposure to copper. Bullion and ETFs are the most accessible, while pure play mining companies and futures offer greater reward with greater risk.
Sources
Carter, Bill. Boom, Bust, Boom: A Story about Copper, the Metal That Runs the World. Simon and Schuster, 2012.
Image Credits
Copper Coins by Siora Photography on Unsplash
Copper Pots by Aurélien Lemasson-Théobald on Unsplash
Copper Pipes by Ra Dragon on Unsplash
