THEMATIC INVESTING CHANNEL
Conflict in Ukraine Could Drive Copper Prices Higher
BEN HERNANDEZ FEBRUARY 28, 2022
As the conflict rages on in Ukraine, investors may want to keep an eye on industrial metals. In addition, related services like miners could also get a bump as metal prices affected by the conflict, like copper, could push higher.
As S&P Global reports, Russia is a heavy producer of industrial metals like copper. The probability of more sanctions against Russia is highly likely as the invasion continues.
"Market sources believe the near-certainty that stricter sanctions will be introduced on trade with Russia could further squeeze supplies in global markets that are already tight, with deficits in some cases,” S&P Global says.
Equities investors have already witnessed the type of volatility that the conflict can bring as the major stock market indexes whipsawed last week. Russia wasn't expecting the takeover to last for as long as it has, giving credence to Ukraine's willingness to defend itself.
That said, more volatility could be doused on the capital markets as news continues to come out of Ukraine.
"Heightened volatility on the escalation of the conflict shows markets had not fully priced in the likelihood of deeper conflict," said Mark Haefele, chief investment officer, UBS Global Wealth Management, on markets' reaction to the invasion. “We expect continued volatility in the near term as leaders calibrate and announce their response to this escalation.”
A Copper Mining ETF to Consider
With volatility can come opportunity. That said, investors may want to bet on higher copper prices, especially if stricter sanctions fall upon Russia.
One opportunity is the Global X Copper Miners ETF (COPX), which seeks to provide investment results that correspond generally to the price and yield performance of the Solactive Global Copper Miners Total Return Index. The index is designed to measure broad-based equity market performance of global companies involved in the copper mining industry.
The fund is up about 10% during the month of February and 13.5% year-to-date. COPX comes with an expense ratio of 65 basis points and a 30-day SEC yield of 2.23% that is distributed twice per year.