We recently compiled a list of the 8 Best Copper Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Rio Tinto Group (NYSE:RIO) stands against the other copper stocks.

Overview of the Copper Supply and Demand

Copper is recognized as a critical metal due to its extensive applications, particularly in electrical wiring and renewable energy infrastructure. Prices of copper reached a record high during the first half of 2024, selling at $5.11 per pound on May 21, 2024. However, the price dropped slightly during the third quarter but remained elevated to its historic rates from the past two years.

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At the start of Q3, copper was priced at $4.42 per pound. It peaked at $4.65 on July 5 but then declined to a low of $3.95 by August 7. The third quarter ended with prices recovering to $4.50 on September 30.

There are several factors affecting the prices of copper. Firstly, the demand for this metal remains high, largely driven by sectors related to the energy transition, including renewable energy and electric vehicles (EVs). However, this demand coincides with a slowdown in the Chinese real estate sector, which is traditionally a major consumer of refined copper. Regardless of the challenges in the real estate market in China, the global demand for copper saw a slight increase of 2.5% in the first half of 2024. The growth was driven by notable demand from China of around 2.7% while other regions also witnessed demand growth of around 2%.

However, despite high consumption, the supply side outpaced the demand. According to a report by the International Copper Study Group (ICSG), there was a surplus of 535,000 metric tons (MT) through the first eight months of 2024. The global copper mine production remained elevated, increasing by 2% to reach 14.86 million MT from January to August 2024. Chile’s Escondida and Collahuasi mines remained key contributors while operations in the Democratic Republic of Congo and Indonesia reported 11% and 22% production growth, respectively. In addition to raw copper refined metal production also witnessed a 5% increase driven by expansion in China and the launching of new facilities in the Democratic Republic of Congo.

According to a report by Investing News Network, analysts believe that the primary reason behind higher prices during the first half of 2024 was not the fundamental supply-demand play, but was led by speculative investment. Analysts back this sentiment on the assumption that market participants would have taken a cautious approach following substantial gains in Q2 resulting in fluctuating prices of copper.

Looking ahead, the ongoing struggles in China’s real estate sector have dampened overall demand for copper. The government’s efforts to stimulate the market through various initiatives to boost housing projects are expected to revive global demand further. Moreover, energy transition efforts also continue to fuel demand for copper, the International Energy Forum estimates that approximately 1.1 new mines will need to come online annually until 2050 just to maintain current demand levels.

Our Methodology

To compile the list of the 8 best copper stocks to buy according to hedge funds, we used the Finviz stock screener and our previous articles. Using the two sources we curated an aggregated list of copper stocks sorted by market capitalization. Next, we ranked these companies based on the number of hedge fund holders as of Q3 2024, sourced from Insider Monkey’s database. The list is ranked in ascending order of the number of hedge funds.

Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

Rio Tinto Group (NYSE:RIO) 

Number of Hedge Fund Holders: 30

Rio Tinto Group (NYSE:RIO) is a United Kingdom-based mining and metals company, which operates in more than 35 countries around the world. The company engages in the extraction of copper, iron ore, aluminum, and diamonds. It also processes the raw metals and makes them ready to be used in the development of future technologies, such as electric vehicles and renewable energy storage.

The company is on track to achieve its ambition of growing its overall copper equivalent production by a 3% compound annual growth rate from 2024 to 2028. Rio Tinto Group (NYSE:RIO) has improved its copper and gold position significantly due to the development of the Winu Project. On December 4, management announced its partnership with Sumitomo Metal Mining (SMM) to develop the Winu copper-gold project located in Western Australia’s Great Sandy Desert. The Winu project is expected to contribute significantly to the company’s copper output, which is crucial as global demand for copper continues to rise, particularly in renewable energy technologies and electric vehicles.

During the fiscal third quarter of 2024, the total copper production of the company decreased slightly by 1% year-over-year to reach 168,000 tonnes of copper. The slight decrease was primarily due to a significant 44% production drop at Kennecott. Management attributed the decline to high wall movement along two major faults, limiting access to high-quality ore. However, on the bright side, Escondida saw a 15% increase in production due to higher ore grades being processed, thereby improving recovery. Moreover, Oyu Tolgoi also experienced a 19% increase in copper production, driven by ramping up underground operations and accessing higher-grade ore. It is one of the best copper stocks to buy according to hedge funds.

Overall RIO ranks 5th on our list of the best copper stocks to buy according to hedge funds. While we acknowledge the potential of RIO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RIO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.