Copper Mining Stocks Fight Commodity Price Declines
Industrial and precious metals have had a volatile year of price swings that have included numerous false starts and subsequent breakdowns.
Copper in particular has been susceptible to the whims of global economic growth trends and the pull of currency forces. Combined they threaten to sink this key building material.
The iPath Bloomberg Copper Subindex Total Return Sub-Index ETN (NYSE: JJC) reflects an unleveraged basket of copper futures contracts with daily liquidity. JJC has fallen sharply in recent months and is currently down 12 percent this year. In fact, this ETN is only 2 percent away from its 2014 low and may ultimately re-test that level if the current trend remains in place.
The sharp rise in the U.S. Dollar index over the last three months has been a headwind for copper prices. In addition, flagging growth in developing nations has been another concern that the demand for industrial goods that use copper will continue to slow.
The high correlation between commodity prices and their commensurate mining stocks has led to recent declines in the Global X Copper Miners ETF (NYSE: COPX) as well. This ETF tracks 24 worldwide companies engaged in the exploration, refinement, and mining of copper.
The majority of the country exposure within COPX is centered on Canada, Australia, and the United Kingdom. This ETF charges an expense ratio of 0.65 percent and has nearly $31 million in total assets.
After surging to a high of as much as 18 percent in July, this ETF has dipped back into negative territory for 2014 and is continuing to lose ground.
Another related fund in this space is the First Trust ISE Global Copper Index Fund (NASDAQ: CU). This ETF uses a modified weighting system for each company based on their revenue exposure to copper production. This allows smaller companies with a higher concentration on the copper industry to be represented in the index.
The largest holdings in CU are Freeport-McMoRan Inc and Rio Tinto Plc, which each comprise 7.6 percent of the total portfolio. This ETF charges a slightly higher expense ratio of 0.71 percent and has $26 million in total assets.
Despite the recent weakness, copper mining stocks may be one to watch for a rebound opportunity given the current oversold status. However, they will have to overcome the existing negative sentiment and commodity downtrend that is holding these stocks underwater.
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