3 Stocks To Gain From Copper Rally

Worldwide Labor Strikes Curb Production

Apart from robust demand from China, production disruption at major copper mines in Chile and Peru are also likely to boost copper prices. The worker strike in Escondida copper mine in Chile failed to end after the labor union rejected negotiation talks with the mines’ controlling owner BHP Billiton Limited (BHP - Free Report) .

In a statement the union said that it will "maintain the strike for an indefinite amount of time," but also pledged to maintain calm on this matter. Escondida produced around 1 million tons of the red metal last year. This is why the 34-day strike in the world’s largest copper mine has weighed on global copper production.

Another major copper mine in Cerro Verde in Peru, which experienced huge expansion recently, is facing a labor strike. Last Friday, workers went on a strike in this Freeport-McMoran, Inc. (FCX - Free Report) controlled mine over better working conditions and special benefit payments. Freeport has a more than 53% stake in this mine, which produced around 500,000 tons of the copper in 2016. Cerro Verde is the biggest copper producer in South America.

Additionally, at the conclusion of its two-day policy meeting ended Mar 15, the Fed raised key interest rates as as widely expected. But the U.S. Dollar Index (DXY) tumbled to 100.56, following a dovish outlook from the Fed regarding the pace and number of further rate hikes this year. The weaker dollar benefited commodities like gold, silver and copper.

Our Choices

An increase in demand from major copper consumer China and strikes at major mining facilities have helped copper prices to move upward recently. Adding to this phenomenon has been the unexpected impact of a Fed rate hike, which has sent the dollar higher.

Picking select copper stocks looks like a smart option at this point. We have narrowed down our search to the following stocks based on a strong Zacks Rank and other relevant metrics.

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