Copper equities appear set to rebound after a period of underperformance compared to copper prices, analysts at UBS believe.
The analysts wrote in a note to clients that while the copper price has shown resilience and gained notably this year, copper equities have lagged, creating an opportunity for investors.
In the year-to-date, London Metal Exchange (LME) copper prices have gained 12 while Comex copper is up 23% over the same period.
Analysts highlighted that market sentiment has been supported by improving Chinese property data, suggesting stabilization in demand, while Europe's economic outlook has improved with increased fiscal spending.
Supply constraints are expected to support prices, they added.
Several major copper producers have reported production downgrades for 2025, reducing overall growth expectations to less than 1%. This limited supply growth, combined with pressures on smelters and tightening scrap markets, is expected to contribute to continued price support.
Copper equities have underperformed despite these positive price trends, with some major players down 10% since the US election, the analysts noted.
Factors such as risk aversion tied to tariff uncertainty and regional equity rotation have contributed to this divergence. However, the recent resilience in copper prices suggests this underperformance may soon reverse, UBS believes.
“Underperformance of copper equities versus copper has started to unwind and we believe this trend will continue,” analysts wrote.
Copper equities on the rise
UBS wrote that they remain positive on the outlook for copper and copper equities against the backdrop of trade war uncertainty and volatility.
The analysts highlighted Antofagasta (TSX-V:AN) as a strong copper pure-play, citing robust 2024 results, project de-risking, and expected production growth.
Freeport-McMoRan Inc (NYSE:FCX, ETR:FPMB) is seen as well-positioned following its recent export permit. The company last month also entered into an earn-in agreement with C3 Metals Inc (TSX-V:CCCM, OTC:CARCF) related to the Bellas Gate copper-gold project in Jamaica.
Southern Copper Corporation (NYSE:SCCO) is favored by UBS for its reliable operations, strong financial standing, and expected 10% volume growth over the next few years.
Anglo American PLC (LSE:AAL) is also expected to benefit from restructuring that will increase its copper exposure and drive a valuation re-rating.
Proactive's picks
Emerging copper plays to watch include Gunnison Copper Corp (TSX:GCU, OTCQB:GCUMF), a mineral exploration and development company focused on copper production in Cochise County, Arizona. The company’s shares gained 2.5% on Monday.
Falcon Gold Corp (TSX-V:FG, OTC:FGLDF), which is carrying out drilling and other exploration work at its Great Burnt copper-gold project in Newfoundland, has seen its shares gain about 9% in the last five days.
Others to follow include Midnight Sun Mining Corp (TSX-V:MMA, OTCQB:MDNGF), which recently identified significant new sulphide and oxide copper targets at its Kazhiba project in Zambia, and TNR Gold Corp (TSX-V:TNR, OTC:TRRXF), which holds a royalty on McEwen Mining Inc (TSX:MUX, NYSE:MUX)'s advanced-stage Los Azules copper project in Argentina.