In 2024, among the leading stocks in the Canadian stock market, there are numerous growth stocks, but investors may be less familiar with Lundin Mining Corp (TSX:LUN), which has risen by over 47% in the past year. The rise in the stock price of this Canadian copper producer is attributed to not only the continuous increase in copper demand but also a multitude of internal and external favorable factors.
Copper is the most important product for Lundin, accounting for approximately 60% of its output. Therefore, the rise in copper prices this year directly boosts the financial performance and stock price of this Canadian copper producer.
The increase in copper prices is the result of multiple factors, such as the intentional production cuts, and the postponement of new production capacity by Chinese copper smelters due to significant drop in copper smelting and processing costs. According to data from the United States Geological Survey (USGS), China is the world’s fourth largest copper-producing country. This is a short-term positive, but in the long-term trend, as global mineral resources are gradually depleted and the difficulty of extraction increases, the number of high-quality copper mines is continuously decreasing, with insufficient new discoveries, and the copper grade of existing mines is continuously declining.
Under the dual forces of tightening supply and increasing demand, it is difficult for copper prices not to rise. Regarding demand, copper prices closely follow the trends of the manufacturing Purchasing Managers’ Index (PMI) in China and the United States. Currently, there is an improvement in the manufacturing sector of the United States and China, leading to an improvement in macroeconomic expectations. In addition, the transition to renewable energy, particularly the development of renewable energy sources such as solar and wind power, the rise of electric vehicles, and the upcoming replacement cycle for electrical equipment, all require large amounts of copper consumption.
Next, let’s specifically discuss copper production. Both the mining and smelting of copper require high energy consumption. If the cost of oil and natural gas rises, the production cost of copper will be pushed up, ultimately leading to an increase in copper prices. In addition, high oil prices indirectly increase the demand for copper. Specifically, rising oil prices stimulate investments in alternative energy sources such as wind and solar energy, and the infrastructure of these energy sources heavily relies on copper.
