Today, many of the largest names in copper are exploding higher. Currently, shares of high-profile copper stocks BHP Group (NYSE:BBL), Southern Copper (NYSE:SCCO), Teck Resources (NYSE:TECK) and Freeport-McMoRan (NYSE:FCX) are all more than 4% higher.
That’s an impressive run for any group. Further, for large-cap copper stocks, this kind of a move suggests some serious sector-specific catalysts are at play.
Indeed, the bull market in commodities we’ve seen play out over the past year has been impressive to watch. Copper has been among the big winners in the commodities world, for a number of reasons. Rising demand for new homes and surging economic activity coming out of the pandemic brought prices from depressed levels to highs not seen in some time. Right now, commodities are once again on the run. When it comes to copper stocks, this means higher profitability and surging valuations.
Like most commodities producers, these companies benefit in an outsized way when copper prices surge. That’s because of the high fixed costs associated with these businesses. Holding costs constant and revenue variable, any sort of surge in revenue via higher prices directly hits these companies’ bottom lines.
So, let’s dive into what investors are watching with these top copper producers today.
Why Are Copper Stocks Soaring Today?
Rising commodities prices are certainly driving the majority of today’s gains in these top copper stocks. The price of copper rose 3.5% today, surging to more than $4.50 per pound. This price surge was supported by the potential for Chinese stimulus and rising demand expectations. These factors remain highly bullish for the overall sector.
On top of this, a weakening U.S. dollar following new inflation numbers has commodities soaring as well. Commodities are priced in U.S. dollars. Accordingly, when the dollar weakens, these commodities increase in value relative to the dollar. Rising inflation tends to weaken currencies, providing tailwinds for producers in sectors like copper.
All in all, copper stocks appear to be positioned well as hedges to combat the uncertainty in the market right now. As such, many investors appear to be looking to these stocks as safe havens. If current market conditions persist, more upside could be on the horizon. At least, that’s what investors in copper stocks are betting on today.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
