Unlock Global Profits With Global X Copper Miners ETF (NYSEARCA:COPX)

Before we jump in…

Hello and welcome to my article on the outlook for copper prices in 2023. I hope this message finds you well and that you had a great start to the new year. I wanted to let you know that I took some time off in 2022 to focus on other projects, but I am excited to be back and share my insights on the commodity industry with you.

In this article, I will discuss the outlook for copper prices in 2023 and the signs of tightness that I see in the market. I will also introduce the Global X Copper Miners ETF as a potential investment option for those looking to gain exposure to the copper mining industry. I hope that you find this information to be valuable and informative. Let’s dive in.

The outlook for copper prices in 2023

From a macro viewpoint

Despite a comeback since October, the LME copper three-month price remained down 14% in 2022 as a whole. While this is marginally lower than the median performance of the basic metals complex (-10%), it will be the first yearly decrease since 2018.

Copper prices were negatively impacted by two main macro headwinds in 2022: China’s “Zero Covid” policy (ZCP) and U.S. monetary policy tightening. While China’s ZCP resulted in a marked slowdown in domestic economic growth and consequently weaker end-use copper consumption in China, the normalization of the U.S. monetary policy tightening resulted in a stronger dollar, tighter financial conditions, and weaker global economic growth, all of which have negatively impacted copper consumption.

Encouragingly, these systemic headwinds could become macro tailwinds by 2023. In China, rigorous Covid-19 regulations have already been eased, and a growth objective of between 4.5 and 5.5% has been envisioned. In the chart below, Deutsche Bank shows how the gradual reopening should take place this year.

Inflation looks to have peaked in the United States. This might force the Federal Reserve to be less aggressive in its rate hikes, exerting negative pressure on the currency and positive pressure on risk assets as financial conditions improve. In the chart below, Goldman Sachs shows how core PCE inflation could decline below 3% by the end of 2023, owing to goods disinflation and slower rent inflation in the second half of the year.

The price of copper would gain from this global macro environment.

From a fundamental viewpoint

Despite the copper price selloff in 2022, a deeper look at the copper market reveals several signs of tightness.

Tightness at the front-end curve

The front-end of the LME copper curve was in backwardation most of the time in 2022, suggesting that physical demand in the LME system was tight.

Very low visible inventories

When you look at visible stocks in the LME, SHFE, CME combined, they are close to all-time lows. Lower copper prices have accelerated the acceleration of stock outflows, making the copper market in a more precarious state. Either a supply shock from Latin America or a demand boost in China would be badly absorbed.

Physical premiums

The physical copper market was tight in 2022, evidenced by the rise in premiums across all regions. Major producers have also raised their annual premiums for 2023, expecting tightness in the market to increase.

In conclusion, the copper market had a deficit rather than a surplus last year, notwithstanding the decline in copper prices, which was mostly attributable to unfavorable macroeconomic circumstances. It is consistent with the most recent projections provided in Q4 2022 by the International Copper Study Group (ICSG). The Group anticipates a shortfall of 328,000 tons in the worldwide refined copper market in 2022. In 2022, it is anticipated that mine output will increase by 3.9%, refined output will increase by 2.9%, and consumption will increase by 2.2%.

Play the copper price recovery with a Copper Miners ETF

A copper miners ETF is an exchange-traded fund that invests in companies that mine for copper ore and other related commodities.

It is a way for investors to gain exposure to the copper mining industry without having to purchase individual stocks or purchase the actual copper ore itself.

Investing in a copper miners ETF provides investors with the potential for higher returns than other copper-related investments.

Why Invest in Global X Copper Miners ETF?

Investing in the Global X Copper Miners ETF provides investors with the potential for higher returns than other copper-related investments, while also providing diversification and exposure to different copper mining companies.

Here are the top-10 holdings of Global X COPX ETF.

The ETF is managed by a reputable company, is traded on a major stock exchange, and is subject to lower management fees and costs than other copper-related investments.

Its expense ratio is 0.65%, which is relatively small considering the fact that the investor gets exposure to the highest-quality copper mining companies, with a relatively well-diversified geographical exposure.

Summary

With a favorable outlook for copper prices and tightness in the market, now is the perfect time to consider adding a copper ETF to your portfolio. The Global X Copper Miners ETF offers a great way to gain exposure to top-quality mining companies while also diversifying your portfolio. Don’t miss out on the potential for higher returns in 2023 – add a copper ETF to your portfolio today.

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