While fast-money bets were placed on the manufacturers and ancillary service providers like charging stations, some investors have looked elsewhere. That initial speculation has come to the forefront heading into 2022. I’m talking about copper. According to Jon Lynch of CME Group, electric vehicles use more than double the copper of an internal combustion engine automobile. The metal is also used heavily in EV infrastructure. With sales of electric and hybrid vehicles in the U.S., Europe, and China increasing over the last ten years, expectations are that this trend will persist.
“The acceleration towards lowering carbon output through alternative energy sources has become a top priority around the world, particularly in the transportation sector. The Biden administration is set to introduce a green infrastructure and clean energy plan which was initially estimated at $3 trillion. First revealed last year, the plan is likely to include upgrades to municipal transit networks, expansion of broadband/wireless broadband to all Americans, as well as investment in electric vehicle infrastructure,” says Lynch.
Not A Time To Overlook Copper
Raw materials are the fabric of the EV movement. It should seem obvious, but without certain metals and minerals, the batteries, motors, and even electronics for automatic mirrors wouldn’t be able to operate.
What’s more, metals like copper are in high demand not only for EVs but also for hybrid vehicles. Then you’ve got to consider that ancillary platforms (I.E., charging stations) will also increase copper demand. Wood Mackenzie estimates by 2030, there will be over 20 million EV charging points globally, consuming 250% more copper than in 2019.
Copper Stocks To Watch For January 2022
Southern Copper Corporation (NYSE: SCCO)
As one of the largest copper producers in the world, Southern Copper could be one of the top copper stocks to watch. Aside from copper, the company also produces molybdenum, zinc, lead, coal, and silver via its facilities in Preu and Mexico.
Southern has reported strong growth this year, and all you need to do is look at the most recent third-quarter results to see why. The company realized a net income of $867.6 million, up 71.5% compared to last year’s quarter. Furthermore, net margins were 32.4%, up from Q3 20202’s 23.8%. Thanks to higher sales and cost controls implemented, Souther Copper said on a year-over-year basis, net income soared 161.6% higher than 2020.
What do analysts think about this copper stock? Both Wolfe Research and Morgan Stanley have high hopes for the company. This quarter, Wolfe started the copper company at Peer Perform with a $62 price target. Meanwhile, Morgan Stanley boosted its Underweight rating to Equalweight and kept its $55 price target.
Freeport McMoRan (NYSE:FCX)
Shares of Freeport have had a banner quarter. After dropping to lows of $30.02 in Q3, FCX stock has managed to reach new H2 highs of $42.77 this week. While the company is a more diversified miner, it does produce significant amounts of copper at more than 1 billion pounds annually in the US. In its last quarterly report, the company also said that the market outlook for the metal is “extraordinarily positive.”
Aside from its mining performance, investors may want to consider Freeport’s recent “up to $3 billion” share repurchase program. It also declared quarterly dividends for 2022 of $0.15 per share.
“With the recent achievement of our net debt target, strong execution of operating plans, and favorable market conditions for our products, we are pleased to commence implementation of our performance-based payout framework.”Chairman and Chief Executive Officer Richard Adkerson in comments from November.
What do analysts think about Freeport? This month Morgan Stanley and Stifel both weighed in on Freeport. Morgan Stanely’s analysts maintain Equal-Weight; Stifel started the mining company with a Buy. The firms also maintain price targets between $34 and $48.
Vale S.A. (NYSE: VALE)
Shares of Vale continue reclaimed losses from earlier in the year. Ever since the summer, VALE stock has gotten demolished. The miner’s shares dropped from over $20 to nearly $11 during the year’s second half. But recent interest in electric vehicles and raw material producers has helped bring back some life.
Vale has its copper mining operations in Brazil and Canada. However, the last quarter was disrupted by labor issues at its Sudbury location. That ultimately impacted total copper production for the quarter. The company also halted copper concentration at its Salobo site due to a fire in October.
Regardless, Vale expects to produce 75,000 – 80,000 t of copper during the 4th quarter. That would bring yearly production into a range of 295k-300k tons of the year. What may be more important to look at is expectations for copper production over 2023-2026. The company anticipates 390-420 kt and is expected to trend above 450 kt after that.
Copper Stocks To Watch In 2022
Thanks to the rise in popularity of electric vehicles, certain raw materials have obtained a much brighter spotlight heading into the near year. With that, mining stocks will likely play an integral role. As 2021 comes to the finish line, we look ahead at potential emerging trends in the New Year, and copper could easily be one of these.
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