Copper's Role in the Clean Energy Boom: Stocks to Watch

Copper has been a hot commodity, driving the transition to a cleaner, greener future. Its unique properties, like high conductivity and durability, make it indispensable in everything from renewable energy projects and drinking water infrastructure to advanced electronics and data centers. From wind turbines harnessing nature's power to electric vehicles (EVs) transforming transportation, copper is at the core of it all.

The red metal's importance is so pronounced that it's often called "Doctor Copper,” a barometer of economic health due to its close ties with industrial production. As of writing, copper's spot price is $3.95 per pound, up from $3.86 per pound at the start of the year. Analysts expect the price to climb even further, reaching between $4.30 to $4.80 per pound by the end of 2025.

According to S&P Global, the global push for electrification and clean energy is set to double U.S. copper demand by 2035. This ‘metal of electrification’ is essential for reaching net-zero carbon emissions by 2050, needed for everything from wind and solar power to electric vehicles and data centers. Moreover, an extra 1.5 million metric tons of copper will be required by 2035 for energy transition alone, bringing total U.S. consumption to 3.5 million tons, a 112% increase from 2023.

Globally, copper mine production was approximately 22 million metric tons in 2023, up from 16 million metric tons in 2010. Projections suggest that production will reach 30 million metric tons by 2036, but this increase may fall short of the anticipated surge in demand.

Despite this, more copper is available today than ever, thanks to recycling efforts. Over 30% of global copper demand in the past decade has been met through recycled copper. Future policies and technologies will continue to improve resource efficiency in mining and recycling, ensuring copper's role in sustainable development.

Moreover, the global copper market is expected to reach around $548.20 billion by 2034, expanding at a CAGR of 5.1% from 2024 to 2034.

So, we believe there could be no wiser move than investing in copper to ride on this rising demand. Here are three copper stocks that could be worthy of adding to your watchlist: Southern Copper Corporation (SCCO), Freeport-McMoRan Inc. (FCX), and Teck Resources Limited (TECK).

Southern Copper Corporation (SCCO)

Southern Copper Corporation (SCCO) is a leading mining giant based in Phoenix, renowned for having the world’s largest copper reserves. While copper is its core business, Southern Copper extracts valuable by-products like silver, zinc, and molybdenum.

This diversification, while significant, doesn’t overshadow its primary reliance on copper, which accounted for aboutc in the second quarter of 2024. The company reported a 6.6% rise in copper production to 242,474 tons during the same quarter. For 2024, SCCO aims to produce 963,000 tons of copper, a 6% increase from the previous year.

In the second quarter (ended June 30, 2024), the company’s net sales increased 35.5% year-over-year to $3.12 billion. Also, its net income attributable to SCCO came in at $950.20 million or $1.22 per share, reflecting an increase of 73.6% and 71.8% from the prior year, respectively.

Street expects SCCO’s revenue and EPS for the current year ending December 31, 2024, to increase 19.3% and 47.2% year-over-year to $11.80 billion and $4.57, respectively. Shares of SCCO have gained over 37% over the past nine months and nearly 14% year-to-date.

The recent uptick in copper prices has not only bolstered the company’s market performance but also enabled it to reward its shareholders. Last month, the company announced a dividend of $0.60 per share, payable on August 26, 2024. At its current share price, the stock offers an attractive dividend yield of 2.4%, appealing to income-focused investors.

Freeport-McMoRan Inc. (FCX)

Next up is Freeport-McMoRan Inc. (FCX), a leading international mining company with a diverse portfolio of assets and some of the world’s largest copper, gold, and molybdenum reserves. Headquartered in Phoenix, Arizona, Freeport-McMoRan operates major sites like the Grasberg minerals district in Indonesia and mining operations in North and South America, including Morenci and Cerro Verde.

Last month, the company achieved a significant milestone with its Indonesian subsidiary, PT Freeport Indonesia, by commissioning a new copper smelter, crucial for expanding Grasberg’s operations. FCX is on track to ramp up to full capacity by the year’s end.

For the second quarter (ended June 30, 2024), FCX’s net sales grew 15.5% from the year-ago value to $6.62 billion. The company’s net income amounted to $616 million and $0.42 per share, indicating a 79.6% and 82.6% year-over-year increase, respectively.

It produced 931 million pounds of copper in the second quarter and expects total production of about 4.1 billion pounds for 2024, including 1.0 billion pounds in the third quarter alone.

Thanks to its strong cash flows, the company paid its shareholders a dividend of $0.15 per share on August 1, 2024. With a payout ratio of 41.7% and a forward dividend yield of 1.52%, Freeport offers investors a compelling mix of income and growth potential. FCX has a four-year average yield of 1.05%, and its dividend payouts have grown at a CAGR of 25.9% over the past three years.

With strong copper prices and a solid demand outlook, analysts predict a 14.6% increase in revenue and a 9.6% rise in EPS for the fiscal year ending December 31, 2024. FCX’s stock has surged more than 16% over the past nine months, reflecting its strong market position.

Teck Resources Limited (TECK)

Teck Resources Limited (TECK) is a leading Canadian resource company that supplies metals essential for global development and the energy transition. With top-tier copper and zinc operations and an industry-leading copper growth portfolio, the company is committed to responsible growth, delivering value, and ensuring long-term business resiliency.

In early July, TECK completed the sale of its remaining 77% interest in its steelmaking coal business to Glencore plc. This strategic move positions Teck Resources as a pure-play energy transition metals company with a strong focus on copper.

TECK’s revenue for the second quarter ended June 30, 2024, came in at CAD$3.87 billion ($2.82 billion), up 10.1% year-over-year. The company achieved a record quarterly copper production of 110,400 tonnes, with 51,300 tonnes from Quebrada Blanca (QB).

Its adjusted EBITDA grew 12.9% from the year-ago value to CAD$1.67 billion ($1.21 billion), driven by robust copper production and surging prices. Further, its adjusted profit from continuing operations attributable to shareholders was CAD$413 million ($300.22 million), or $0.79 per share.

For the current year ending December 31, 2024, TECK’s revenue and EPS are projected to reach $9.98 billion and $1.89, respectively. Over the past nine months, the stock has gained 23.2%.

With proceeds from the coal business sale, TECK’s Board authorized up to a $2.75 billion share buyback and approved a dividend payment of $0.625 per share, including a $0.50 supplemental dividend, payable on September 27, 2024. This, along with a $500 million buyback announced in February, brings total shareholder returns to $3.5 billion from the sale.

Teck offers an attractive proposition for income-oriented investors, with a four-year average dividend yield of 1.34%. Additionally, its dividend payouts have grown at CAGRs of 32.6% over the past three years and 19.6% over the past five years, making it a compelling choice for those seeking exposure to the copper sector.

Bottom Line

As the world pushes for a greener future, copper's pivotal role in renewable energy, EVs, and advanced electronics makes it a vital commodity to watch. Companies like SCCO, FCX, and TECK are well-positioned to benefit from this surging copper demand. These dividend-paying stocks offer stable returns and are poised to power a sustainable future, making them worthy of your portfolio's attention.