5 Stocks that Could Deliver Superb Gains During a Copper Supercycle

Lately, there's been a lot of talk about gold.

But another commodity that's gone unnoticed for its recent rally is copper.

Copper prices have gone past the US$10,000 per tonne threshold.

The steep rise comes following the unexpected tightening in the global mine supply. Disruptions at major mines have left smelters paying historically steep prices to get hold of the metal.

This recent surge might not just be a fleeting rally, but potentially the beginning of a much more significant uptrend to come.

You see, there's a structural long-term demand for copper as it's a key component used in electric vehicles (EVs) and renewable energy infrastructure including hydroelectricity, wind turbines and solar panels.

Fact of the matter is -

• EVs require copper
• AI wants copper
• EVs batteries need copper

The increasing adoption of clean energy technologies is expected to drive a substantial surge in demand over the next few decades.

Investors looking to potentially make a return from copper without holding the commodity can do so by taking exposure to these stocks that benefit from rising copper prices.

Take a look...

#1 Hindalco

Hindalco Industries is an Indian aluminium and copper manufacturing company.

It's a subsidiary of the Aditya Birla Group.

Hindalco is the largest aluminium rolling and recycling corporation in the world, as well as a major copper player. It is also one of Asia's top primary aluminium producers.

Along with its global subsidiary Novelis Inc., Hindalco has a presence in 12 countries. From bauxite mining to alumina refinement, aluminium smelting, rolling, and extrusions, the company engages in a wide range of operations.

Hindalco produces LME grade copper cathodes, continuous cast copper rods in various sizes, and precious metals like gold and silver.

It's is one of the major manufacturers of 19.6mm diameter copper rods, which is used for railway electrification.

It has already thrown its hat into the EV ecosystem. Hindalco, in December 2023, announced its plans to invest Rs 8 billion (bn) to set up a battery aluminium foil plant in Odisha as it evaluates opportunities in the electric mobility value chain.

The Odisha unit will be located alongside a 25 MW solar power plant. It can access extra solar energy from a 400 KV national grid connection. This 25,000-tonne plant will be commissioned by July 2025.

Hindalco expects national demand for battery-grade aluminium foil to reach 40,000 tonnes by 2030, prompting their foray into this space. The unit will initially focus on exports. The target market will be abroad and domestically.

Going ahead, the company is focused on downstream expansions in India, with an emphasis on increasing contributions from value-added products. This strategy aims to enhance profitability and protect the company from fluctuations in aluminium prices.

Further, it expects to sustain its positive momentum in the copper business, driven by increasing volumes, robust demand, and improved TC/RC (treatment charge/refining charge) margins.

For more details about the company, check out Hindalco's Fact sheet and its quarterly result.

#2 Hindustan Copper

The main activities of Hindustan Copper include mining of copper ore and production of refined copper as well as downstream products such as continuous cast copper wire rods.

It's the only vertically integrated copper producer in India engaged in a wide spectrum of activities ranging from mining, beneficiation, smelting, refining, and continuous cast rod manufacturing.

Shares of Hindustan Copper have seen a sharp rally ever since copper prices started to move up.

The company is poised to benefit from the surge in global copper prices as it is the only company mining copper ore in India with fully developed infrastructure facilities. The company holds mining lease for more than 80% of the country's copper reserves.

This rally in copper prices, which began in mid-February, has brought an end to a period of stagnant trading.

Going forward, the spike in demand from the power sector in view of the government's thrust on renewable energy and the increasing demand from households for consumer durables will increase the demand for copper in India.

Manufacturers of hybrid and electric vehicles (EVs) will also augment the consumption of copper, as EVs use four times more copper than traditional internal combustion engines.

The projected demand for copper due to EVs is expected to increase by around 1.7 million tonnes by 2027. Copper demand is also expected to increase further in the health sector due to its biocidal properties.

All this bodes well for Hindustan Copper.

To know more, check out Hindustan Copper financial factsheet and its latest quarterly results.

#3 Adani Enterprises

Kutch Copper Ltd (KCL), a subsidiary of Adani group's flagship firm Adani Enterprises, is setting up a greenfield copper refinery project to produce refined copper with 1 million tonnes per annum capacity in two phases.

In fact, this subsidiary recently inaugurated the first unit of its greenfield copper refinery project by shipping the first batch of cathodes to a client.

Note that this marks a big entry by the Adani group in the copper segment.

With capacity constraints in India amidst rising domestic demand and export opportunities, there could not be a better time for Adani to enter the Copper cathode production segment.

Also, the company enjoys a location advantage. The copper facility, which is strategically located in Mundra, aims to create synergies by utilizing the Adani group's current infrastructure.

Over the years, Adani Enterprises has developed and listed a number of business entities.

Its foray into green hydrogen, airports, data centres, and roads aligns with India's booming infrastructure and digital transformation needs.

While financial health remains a concern, the company's proven track record and recent exoneration from legal hurdles inspire confidence.

#4 Exide Industries

Exide Industries provides batteries for Indian Navy which requires copper cell connectors, thus driving the need of copper with each order.

During the year under review, the company successfully supplied the second set of Type-IV batteries including special copper inter-cell connectors and spares for the Indian Navy's Scorpene-class submarine, two sets of Type-II (ATV) batteries for nuclear submarines and one set of Type-I batteries for Kilo-class submarines.

For over 75 years, Exide Industries has been the beating heart of India's battery market.

From powering the first sputtering rickshaws to the purring engines of modern sedans, Exide has established itself as the powerhouse, with its recent work towards lithium-ion batteries and energy storage solutions in full force.

Exide is in the process of setting up a plant for lithium-ion cell production and a plant to manufacture absorbent glass mat (AGM) batteries with a capex of around Rs 40 bn.

This is its most ambitious project, and the work is on in full swing.

Despite such high capex plans, the company has sufficient cash balance to meet the capex requirements comfortably.

Moreover, the company has a clear advantage as it has a bigger manufacturing capacity compared to Amara Raja's.

This gives Exide an edge over Amara Raja and other competitors as it can manufacture a higher number of units.

To add to this, the company also has a leading position in the replacement market, making it a top player in the industry.

The company is one of the early movers in the first 70% of the value chain where it will start manufacturing lithium-Ion cells as well.

#5 Vedanta

Sterlite Copper, a unit of Vedanta, has steadily grown to become one of India's leading contributors to copper production, contributing up to 36% of India's demand for refined copper.

The company's business unit consists of copper smelter, refinery, sulphuric acid plant, phosphoric acid plant, and copper rod plant at Tuticorin in southern India and a refinery and two copper rod plants at Silvassa in western India.

However, Vedanta's copper smelter in Tamil Nadu has been shut for years due to alleged violation of green energy norms.

Experts are placing Vedanta at the top of the list of stocks that could benefit from rising copper prices as it's the core business of the firm.

Vedanta is a diverse natural resource company that explores, extracts, and processes minerals as well as oil and gas.

The company has invested in growth capex for its aluminium, zinc, copper and oil and gas businesses and will incur a significant capex in the coming financial years.

The company is slowly diversifying its operations and foraying into high-growth sectors. It recently forayed into the manufacture of semiconductor and display units.

Vedanta's presence in high-growth businesses like semiconductors and its monopoly in nickel (an important raw material for EV batteries) segment puts the company in a sweet spot... at least till the time commodity prices are surging.

In Conclusion

Copper happens to be the most critical commodity in terms of base metals to watch.

It's known as 'Dr Copper' by commodity traders for the simple reason that without it, nothing is possible.

Whether it's construction, electronics, automobiles or anything at all, you can't do much without copper. So, it's a proxy play of industrial activity, both global and national.

Also, the transition to clean energy will be a big tailwind for copper in the long term.

Therefore, all factors indicate that demand is likely to exceed supply, which could potentially have a positive impact on prices and, thus, on the value of the shares of companies involved in the sector.

Happy Investing!

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