A rapid rebound of copper prices following the pandemic-led economic slowdown has been driven primarily by high demand and a supply crunch. Copper is currently trading near-record highs, just below $10,000 per tonne, as inventories have fallen to 15,225 tonnes, their lowest level since 1974.
This surge in copper prices has fostered heightened investor interest in this space, as is evident in the United States Copper Index Fund’s (CPER) 13% gains over the past month, versus SPDR S&P 500 ETF Trust’s (SPY) 3.9% returns.
And the demand for copper is expected to increase in the coming months with the increasing demand for copper by major end markets, such as automotive and construction. President Biden’s $1 trillion bipartisan infrastructure plan is also expected to boost the demand for copper. Given this backdrop, we think it could be wise to scoop up the shares of BHP Group (BHP), Rio Tinto Group (RIO), Glencore plc (GLNCY), and Southern Copper Corporation (SCCO), which are well-positioned to benefit from the red-hot copper market.
BHP Group (BHP)
Headquartered in Melbourne, Australia, BHP is in the natural resources business internationally. It operates through Petroleum; Copper; Iron Ore; and Coal segments. The company explores for, develops, and produces oil and gas properties; it mines for copper, silver, zinc, molybdenum, uranium, gold, iron ore, and metallurgical and energy coal.
On October 14, 2021, BHP and POSCO (PKX) agreed to explore greenhouse gas emissions reduction technologies in integrated steelmaking. BHP’s Chief Commercial Officer, Vandita Pant, said, “The pathway to net zero for steelmaking is not yet clear but we believe that, by working with industry leaders like POSCO, together we will find solutions more quickly to help reduce carbon emissions in steelmaking and along the value chain.”
BHP’s total petroleum production increased 3.1% year-over-year to 27,484 Mboe for the quarter ended September 30, 2021. The company’s total copper payable metal in concentrate grew 1.6% sequentially to 256.9 kt. Also, its payable zinc sales came in at 32,635 t, up 1.8% sequentially.
BHP’s revenue is expected to increase 2.6% year-over-year to $62.37 billion for its fiscal year ending June 30, 2022. Over the past year, the stock has gained 8.9% in price to close its last trading session at $55.93.
BHP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has a B grade for Growth, Value, and Quality. Click here to access the additional POWR Ratings for BHP (Sentiment, Momentum, and Stability). BHP is ranked #5 of 36 stocks in the Industrial - Metals industry.
Rio Tinto Group (RIO)
London-based RIO explores for, mines, and processes mineral resources worldwide. The company’s key offerings are aluminum, copper, diamonds, gold, borates, titanium dioxide, salt, iron ore, and uranium. It owns and operates open pits, underground mines, mills, refineries, smelters, power stations, and research and service facilities.
On October 20, 2021, RIO outlined actions to strengthen its business and improve its performance. It also formulated a longer-term strategy to ensure it thrives in a decarbonizing world and continues to deliver attractive shareholder returns, in line with its policy. The deployment of the Rio Tinto Safe Production System is underway to ensure the Group regains its position as Best Operator.
RIO’s refined copper production came in at 50.5 thousand tonnes for the third quarter ended September 30, 2021, up 103.6% year-over-year. Its total mine production increased 20% sequentially to 1,110 thousand ounces. Also, its share of total bauxite shipments increased 4.4% sequentially to 14,201 tonnes.
Analysts expect RIO’s EPS and revenue to increase 99.5% and 40.7%, respectively year-over-year to $15.35 and $62.77 billion in its fiscal year 2021. The stock has gained 13.1% in price over the past year to close yesterday’s trading session at $65.54.
RIO’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Value, Stability, and Quality. Within the Industrial - Metals industry, it is ranked #6. Click here to see the additional POWR Ratings for RIO (Sentiment, Growth, and Momentum).
Glencore plc (GLNCY)
Headquartered in Baar, Switzerland, GLNCY produces, refines, processes, stores, transports, and markets metals, minerals, and energy products. It operates through two segments: Marketing Activities and Industrial Activities. It also engages in oil exploration/production, distribution, storage, and bunkering activities.
GLNCY announced on August 17 that it had entered a long-term strategic partnership with Britishvolt to supply responsibly sourced cobalt. David Brocas, the company’s Head Cobalt Trader, said, “Our commitment to support our partners in meeting their requirements for essential battery ingredients is key to underpinning long-term supply agreements.”
GLNCY’s revenue increased 79% year-over-year to $93.80 billion for its fiscal first half, ended June 30, 2021. Its adjusted EBITDA increased 79% year-over-year to $8.65 billion. Its net income came in at $1.28 billion compared to a $2.60 billion net loss in the prior-year period. Also, its EPS came in at $0.10 compared to a $0.20 loss per share in the year-ago period.
GLNCY’s revenue is expected to increase 47.6% year-over-year to $210.16 billion for its fiscal year ending December 31, 2021. Over the past year, the stock has gained 133% to close yesterday’s trading session at $10.14.
GLNCY’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth, Quality, Momentum, and Stability.
Southern Copper Corporation (SCCO)
SCCO in Phoenix, Ariz., mines for, smelts, and refines copper and other minerals in Peru, Mexico, Argentina, Ecuador, and Chile. The company is involved in the mining, milling, and flotation of copper ore to produce copper and molybdenum concentrates, smelting copper, and refining anode copper to produce copper cathodes.
SCCO’s net sales increased 62.3% year-over-year to $2.90 billion for its fiscal second quarter, ended June 30, 2021. The company’s adjusted EBITDA grew 141.9% year-over-year to $1.86 billion, while its net income increased 259.4% to $932.70 million. Also, its EPS came in at $1.21, up 255.9% year-over-year.
For its fiscal 2021, analysts expect SCCO’s EPS and revenue to increase 112.1% and 36%, respectively, year-over-year to $4.30 and $10.86 billion In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 28.9% over the past year to close yesterday’s trading session at $64.35.
It’s no surprise that SCCO has an overall B rating, which equates to a Buy in our POWR Rating system. In addition, the stock has a B grade for Stability and Quality.
Click here to see SCCO’s ratings for Growth, Value, Momentum, and Sentiment as well. In addition, SCCO is ranked #10 in the Industrial - Metals industry.
BHP shares were trading at $55.98 per share on Friday afternoon, up $0.05 (+0.09%). Year-to-date, BHP has declined -3.93%, versus a 22.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.4 Stocks to Buy as Copper Prices Near Record Highs appeared first on StockNews.com