Copper holds near record highs. These 5 stocks could benefit from a supply shortage
Copper on the COMEX was trading around $6.6 per pound on September 28, just below the record from September 8. The International Energy Agency expects that today's mines and announced projects will cover only about three-quarters of demand in 2035. But the expensive metal feeds into miners' results very unevenly. The same raw material thus means five different investments for five companies on the New York Stock Exchange.
Key points
Southern Copper posted record revenue of $4.29 billion in the second quarter, even though it sold 1.5% less copper. Its Peruvian output fell 12% year-on-year due to lower ore grades.
You're currently paying 15.4 times EBITDA for Southern Copper shares, but only five times for Teck. Teck's share price, however, mainly tracks the price of Anglo American shares because of the planned merger.
Freeport consolidates all of Indonesia's Grasberg in its results, but it owns only 48.76%. The extension of mining rights beyond 2041 is to be accompanied by a transfer of another 12% to the Indonesian state.
Hudbay reports negative net cash costs per pound of copper, −$0.40. The reason is gold, which accounted for 39% of its gross revenue in the first quarter.
The Brazilian Furnas project is expected to cost $1.28 billion, about one-third of Ero Copper's entire market value. The company carries net debt of $452.7 million and has liquidity of only $181.7 million.
The five miners from the New York Stock Exchange illustrate this clearly. Southern Copper $SCCO posted record revenue in the second quarter even though it sold 1.5% less copper year-on-year. Teck Resources $TECK increased production by a quarter in the same period, while Freeport-McMoRan $FCX is just restoring operations at Indonesia's Grasberg mine after last year's fatal accident. Hudbay Minerals $HBM and Ero Copper $ERO are building much of their future growth on mines that so far exist only in projects. Net cash costs per pound of copper range from about zero at Southern Copper to more than $2 at Ero Copper. Teck and Hudbay are left with cash after deducting debt, while Ero owes nearly a year's EBITDA.
Why more expensive copper won't boost profit equally for every miner
Copper demand is driven by power grid construction, electromobility and newly data centres. Supply reacts slowly because ore grades at old deposits are falling and more than ten years typically pass from discovery to production. The IEA's latest outlook narrowed the estimated 2035 deficit from about 30% to 25% because projects in Congo and Zambia are moving forward. Congo has tripled output over the last ten years, and Zambia has attracted about $10 billion in four years after investor-friendly reforms and aims for 3 million tonnes a year by 2031. But this is a model calculation based on today's project pipeline; a certain shortage does not follow from it. Tension is also visible in China, where, according to analysts quoted by Reuters, refinery output will grow by only 3–3.4% this year, the slowest since at least 2000. Smelters lack concentrate.
But the metal price is only one side of the equation. The other is determined by four variables, in which the five miners diverge:
Net cash costs per pound. Companies deduct revenue from by-product metals from costs. Southern Copper, for example, reported $2.29 per pound in the second quarter before credits and only $0.05 after them.
Ore grade. Lower grades mean more rock mined for the same pound of copper. Because of this, Southern Copper mined 12% less in Peru year-on-year.
Capital intensity of growth. Freeport now estimates the expansion of the Bagdad mine in Arizona at about $4.5 billion, about 30% more than in 2023.
Balance sheet. A company with net cash finances construction from operating cash flow, while an indebted one must cut investment or borrow more expensively when prices fall.
This spring showed how quickly the equation can flip. After diesel and other inputs became more expensive due to the Middle East conflict and volumes from Grasberg were lower, Freeport in April raised its estimate of average net cash costs for 2026 from $1.75 to $1.95 per pound. This happened at a time when copper was testing record highs.
Freeport: US mines keep profit until Grasberg recovers from the accident
Freeport is the largest copper producer of the five. At a price of $71.96 per share on September 28 and about 1.44 billion shares, it has a market value of about $104 billion. At the same time, it carries the most risk concentrated in one place. Indonesia's Grasberg accounted for half of the company's proven and probable reserves at the time of last year's accident.
In the second quarter, Freeport produced about 357,000 tonnes of copper. The underground Grasberg Block Cave mine doubled output during the quarter from an average of 34,000 tonnes of ore per day in April to 69,000 tonnes in June. Management expects 65% of full capacity for all of Grasberg in the second half of 2026, 80% in mid-2027 and nearly full operations by the end of 2027. Copper sales in 2027 should then be more than 20% higher than this year. In May, a spokesman for the Indonesian subsidiary mentioned to Reuters a delay until the beginning of 2028, but two weeks later management confirmed the end-of-2027 target. The schedule thus has little room for slippage.