Copper prices are on fire, hitting all-time highs in recent weeks. That puts the commodity at risk of a pullback—or, at least, reduces the likelihood of more big gains from here. Fortunately for several mining stocks, higher commodity prices can help for years to come.
Through early trading Tuesday, copper has surged 21% since the start of April while Brent crude was down about 4%. The so-called “pair trade” of buying copper and betting against oil has generated a nice profit, driven by perceived demand growth for copper thanks to growth in artificial intelligence computing, electric vehicles, and heat pumps for home heating and cooling.
The trade looks stretched, however, Manish Kabra, head of U.S. Equity and multi-asset strategy at Société Générale, or SocGen, wrote in a Tuesday report.
The “long copper, short oil [trade] played out. Book profits,” Kabra says. “Since early April, the copper price has hit an all-time high and the Brent price has ground lower.”
The better idea now, he says, is to look at the stocks of companies that benefit from commodity price changes. He recommends a basket of stocks benefiting from “greenflation” as the clean energy transition continues.
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“Our greenflation basket consists of stocks that are primed to gain from surging demand or reduced supply of 24 critical metals needed in climate technology and from stepped-up investment by mining companies,” wrote the analyst.
Along with copper, greenflation-linked commodities include aluminum, iron ore and steel, lithium, nickel, graphite, manganese, cobalt, silver, uranium, and others that are used in a variety of climate technology.
For example, copper, of course, transmits electricity inside of homes and cars. Electric-vehicle batteries use lithium. Solar panels and wind turbines include many metals such as steel and aluminum.
North American-based commodity producers in SocGen’s greenflation basket included aluminum producer
; copper producers
and
; lithium miners
and
; uranium miner
; silver royalty streamer
; and diversified metals producer
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The eight stocks have different sizes and valuations. Market values range from about $1 billion for Lithium Americas, which isn’t profitable yet, to $74 billion for Freeport, which trades at about 24 times estimated 2025 earnings.
Through early trading Tuesday, the eight stocks are up an average of 32% over the past 12 months. Excluding the lithium stocks—which have fallen along with benchmark lithium prices—the average gain is an impressive 44%, beating the
by almost 20 percentage points.
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To be sure, anyone looking to construct a greenflation basket of commodity stocks needs to consider what’s going on at each company. And they need to be comfortable investing in mining stocks—which can rise and fall with commodity prices, despite solid decisions from a management team. But SocGen’s report gives investors confidence that now is still a good time to do that.
Write to Al Root at allen.root@dowjones.com
