This Copper ETF May Soar in 2024

After correcting from the March 2022 high and consolidating in 2023, copper prices could move appreciably higher in 2024. The United States Copper Index Fund (CPER), which is the largest copper ETF tracking the red metal, moves higher and lower with copper prices. 

Copper is a bellwether industrial commodity, an essential infrastructure building block. Copper is the leader of the nonferrous metals that trade in the physical forward market on the London Metals Exchange. The Chicago Mercantile Exchange provides a liquid copper futures contract. 

Meanwhile, copper is also a crucial input for the green energy economy, leading Goldman Sachs to call the metal “the new oil.” Electric vehicles, wind turbines, and other green energy alternatives require increasing copper tonnage.  

Copper Prices Down From Record Peak 

After reaching a record $5.01 per pound high in March 2022, copper’s price corrected lower.

Source: Barchart 

The chart shows copper’s 37% decline from the March 2022 high to the July 2022 $3.15 per pound low. Meanwhile, copper closed 2022 at $3.8055 and was 2.2% higher in 2023, closing December at $3.8905. Copper prices flirted with the $4 level at the end of 2023. 

Mining Legend Forecasts Higher Copper Prices in 2024 

Robert Friedland is considered a legend in the mining sector. He is the founder and executive co-chairman of Ivanhoe Mines Ltd. Mr. Friedland recently said, “We probably need about $15,000 a ton, stable for a long period of time, before the industry can really gear up and build those giant mines.” 

LME copper forwards were around $8,600 per ton at the end of 2023, nearly 75% below the level that spurs new output. A 75% rally would push the COMEX copper futures price to almost $7 per pound. 

Meanwhile, some researchers are calling for copper demand to double by 2035 because of energy transition initiatives, and it will take a better part of a decade to bring new output online. Supply and demand fundamentals support a higher copper price over the coming years.  

Outflows for Copper ETF in 2023 

After a quiet consolidation year in the copper market, funds flowed out of CPER.

Source: etf.com 

The chart shows $47.5 million flowed out of CPER in 2023, a considerable amount as at $24.07 per share, CPER had $129.85 in assets under management. The copper ETF charges a 0.97% expense ratio. As the price consolidated, investors and traders exited the product.  

China is a Critical Factor in the Price of Copper 

China is the world’s leading commodity consumer, and copper is no exception. China is the second-leading economy with the top population. In 2022, China accounted for over half the world’s refined copper consumption. Chinese economic weakness weighed on copper and other base metal prices in 2023, but an economic rebound in 2024 would translate to higher metal prices. 

CPER May Soar Higher in 2024 

Copper futures prices fell 37% from the March 2022 high to the July 2022 low. At $3.9550 at the end of 2023, they moved 25.6% higher from the mid-2022 low.

Source: etf.com 

The chart shows that the CPER fell 36.6% from $30.12 in March 2022 to $19.11 per share in July 2022. At $24.07 on December 29, the copper ETF recovered 26%, as it does an excellent job tracking copper prices.  

The prospects for a soft landing in 2024, with falling interest rates and a weaker U.S. dollar, favor upside gains in the red metal that is an infrastructure building block and critical ingredient in green energy initiatives. Moreover, a recovery in the Chinese economy could ignite a ferocious rally that challenges the March 2022 all-time peak at over $5 per pound, further supporting the copper ETF, CPER.