ASX copper shares have broadly outperformed the market…now what?

With talk of a new commodity super cycle percolating, copper is one to keep an eye on.

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Record copper price ASX shares A happy minner does the thumbs up in front of an open pit copper mine, indicating a surging share price in ASX mining shares

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ASX copper shares have broadly outperformed the market, spurred on by soaring copper prices.

Copper hit all-time highs last month, trading for US$10,417 (AU$13,355) per tonne on 7 May.

Prices have retraced a touch since then, down 1.7% to US$10,245 at time of writing.

That decline has largely been blamed on China’s attempts to put a lid on soaring commodity prices, including iron ore. Talk that the US Fed may begin to wind down its quantitative easing (QE) program also dragged on investor sentiment.

Nonetheless, the red metal has gained 114% since 27 March 2020, when it traded for US$4,790 per tonne following the pandemic driven global asset fire sale.

Why is copper at near all-time highs?

Demand for the red metal has grown rapidly as the world emerges from a lengthy lockdown and nations turn to infrastructure spending to stimulate their economies. Copper is used in all sorts of construction work, from plumbing to roofing to electric wiring.

Speaking of electric wiring, it’s copper’s high conductivity that looks to really see demand ramp up as the globe attempts to decarabonise its power sources and increasingly turns to electric vehicles. EVs use roughly 4 times as much copper as combustion engine cars. And copper is also in high demand for the roadside charges you’ll find them hooked onto.

Richard Adkerson, the CEO of United States’ based copper mining giant Freeport-McMoRan Inc, calls the long-term outlook for copper demand “extraordinarily strong”.

At the same time, he notes that the copper supply is quite restricted, with new discoveries far and few between.

Speaking to Bloomberg television, Adkerson said:

There’s no shale oil for copper. Unlike the oil industry, where you have an ongoing flow of discoveries and now with a new element of shale coming in, copper mines of size are very rare to find.

How have these 2 ASX copper shares performed?

All kinds of factors will determine the returns from ASX copper shares, including management, their debt levels, and how much it costs them to dig the red metal from the ground.

But undoubtedly higher prices offer ASX copper shares a welcome lift.

Oz Minerals Limited (ASX: OZL) shares, for example, are up 271% since copper’s low on 27 March 2020. The Sandfire Resources Ltd (ASX: SFR) share price is up 130% since the low.

By comparison, the S&P/ASX 200 Index (ASX: XJO) has gained 49% in that same time.

And both ASX copper shares have continued to do well in 2021.

Sandfire’s shares have gained 31% year-to-date, while OZ Minerals’ shares are up 36% in the calendar year.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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