Capitalize On $156 Billion In China Infrastructure Projects With Copper

Copper may start to look a little shinier to investors over the next few years. With the leadership transition complete in China and Xi Jinping announced to take over presidency, the Chinese government will begin more copper intensive infrastructure projects.

This September Beijing announced plans to increase infrastructure spending by $156 billion and analyst all seem to agree that the government transition will lead to more railway and power grid spending. As these projects break ground, analyst project that China’s copper demand should grow between 5.3-6% in 2013 and up to 6.5% per year in 2014 and 2015.

This is very big news for copper producers as China accounts for 40% of global copper consumption. Copper’s current price is sitting around $3.496 per pound for November contracts on the New York Mercantile Exchange and Goldman Sachs sees prices reaching $3.62 in three months and $4.08 pounds in six months.

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Although the projects may not break ground until 2013, this is a good long-term play for copper producing stocks. If China’s copper demand grows at projected rates a little copper in your portfolio could be a winner:

Southern Copper Corp (SCCO):  With an operating margin of 47.84% and P/E ratio below it’s peers and industry average, Southern Copper is in a good position to appreciate with an increased global copper demand.

Freeport-McMoRan Copper & Gold (FCX): Projected EPS growth over the next 2 quarters makes this a stock worth keeping on your radar.


Written by Nick Sousa