This Is Wall Street’s Preferred Stock Amid Copper Chaos

The world refines about 27 million metric tons of copper annually. (Justin Hamel/Bloomberg)

Key Points

About This Summary

• Freeport’s Grasberg mine accident, involving two fatalities and five missing, has impacted global copper supply by 3%.
• The accident shifts the 2025 global copper balance from a 105,000 metric ton surplus to a 55,000 metric ton deficit.
• Copper mining stocks, excluding Freeport, rose an average of 4.1% on Wednesday, with Glencore being a preferred investment.

Freeport McMoran’s tragic accident has roiled the market for one of the most critical elements in the world, copper, leaving investors wondering how to position themselves for what comes next for the red metal.

The overall picture for copper looks positive. Demand is accelerating, driven by increasing electricity consumption from the proliferation of electric vehicles, heat pumps, and power-hungry artificial intelligence data centers. Benchmark copper prices have risen to about $4.50 a pound from $3 a pound over the past five years.

Miners, however, reacted to higher prices by expanding supply by about 6% a year on average over that span, up from an average annual growth of about 1% in the prior five years. Supply growth outstripping demand growth created some caution on Wall Street, with analysts projecting near-term copper price declines.

Then came Freeport’s accident at its Grasberg mining operation in Indonesia.

On Wednesday, the miner reported that two workers died and five remained missing after a mud rush deposited some 800,000 metric tons of mud and debris earlier this month at the mine. Freeport stock plunged 17% on Wednesday.

Copper prices were weakening at the time of the accident. Prices had already plunged by more than 20% on July 31 after President Donald Trump decided to impose a 50% tariff on copper products, such as wire, rather than raw copper. Then, prices dropped another nickel a pound this past week after “weak economic data from China and profit-taking,” wrote RBC analyst Sam Crittenden in a recent report.

China’s industrial output rose 5.2% in August from a year ago. Economists were expecting a 5.6% rise. “Growth in Chinese industrial output and copper prices have historically been intertwined, with China as the largest copper consumer globally,” added Crittenden.

The world refines about 27 million metric tons of copper annually. China accounts for about 12 million metric tons of that. Freeport’s Grasberg mine accounts for about 3% of all the world’s supply, or about 770,000 metric tons, wrote Citi analyst Alexander Hacking in a Wednesday report.

That production is impaired for months. How much that will mean to copper prices depends on many factors, most importantly, overall demand. Still, losing a large mine will support prices, Hacking added.

Others agree with that sentiment. “In isolation, [Grasberg outages] push our 2025 global copper balance from a small surplus (105,000 metric tons) into a small deficit (55,000 metric tons),” wrote Goldman Sachs analyst Eoin Dinsmore in a Wednesday report.

Deficit and surplus are terms that mining and commodity analysts use to describe supply and demand balances. A deficit generally means there is more copper demanded than mines plan to produce. That doesn’t mean a shortage of copper per se. Typically, prices rise until enough demand is wiped out to bring the market into balance.

A deficit is supportive of prices, but the deficit is small. What’s more, Dinsmore pointed out that supply was outstripping demand early in 2025. He expected prices to slide to about $4.40 a pound this year. (Copper rose to $4.81 a pound on Wednesday, but then fell a few pennies to $4.78 on Thursday.)

Dinsmore could see prices settling around $4.70 a pound in the near term. His long-term call for copper prices is about $4.90 a pound. Long-term price expectations are important for commodity investors. Commodity stocks don’t always react to spot prices. It’s the longer term average prices that determine returns and growth of most producers.

The Grasberg accident could be a catalyst to send copper prices back near $5 a pound. To be sure, copper mining stocks reacted to Freeport’s news, but investors don’t seem to be discounting higher copper prices, yet.

Copper mining-related stocks Southern Copper , Glencore , BHP, and Anglo American rose 4.1% on average on Wednesday. Their shares rose 0.9% on average on Thursday, while Freeport shares slipped another 6.2%. The S&P 500 and Dow Jones Industrial Average fell 0.5% and 0.4%, respectively.

Those are significant moves. The market value of the five miners, however, was roughly unchanged over two days at about $373 billion. All that’s happened is that the value has been transferred from Freeport to the other four.

Wall Street’s preferred play on copper is diversified miner and commodities trader Glencore, with 84% of analysts covering the company rating the shares a Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

The Buy-rating ratios for BHP, Southern Copper, and Anglo American are 0%, 11%, and 39%, respectively. Before the accident update, 74% of analysts covering Freeport shares rated them Buy. That’s down to about 60%.

Glencore is Wall Street’s preferred play. Any move higher in copper prices would add some extra momentum to the idea.

Write to Al Root at allen.root@dowjones.com