Copper price analysis

What is copper?

Everyone knows what copper is as it is used in many utensils and objects in our daily lives. But did you know that copper is also the most sought after non-iron metal worldwide? And yet this is the case.

Copper is primarily produced by only a few major countries and the one that produces the most copper is Chile which boasts 37% of the annual global production. The United States produces 8% with various other countries around the world, 25 to be precise, that also produce copper in varying amounts.

There are in fact 77 types of copper which differ according to their quality throughout the world.

As a commodity copper is mainly used in industry for the manufacture of electronic appliances as it is an excellent conductor. This sector alone represents the usage of over 50% of the annual production. However it is also used in the construction sector which is the second largest category of use.

Historical analysis

The technical analysis of copper indicates how the price of this metal has changed over the last few years on the markets. The stock market charts displaying the historical data for copper over the last decade are also informative.

We also note a strong upwards trend between 2003 and 2006 with a historical peak of $8,884 per ton in May 2008 after a downwards correction occurred in 2007. Since 2008 the price of copper has fallen, pulled down by a fall in the stock markets and that of commodities following the economic crisis.

For the last ten years or so the price of copper appears to have stabilised to around $7,000 per ton.

Movements in the price of copper according to supply:

Copper is extracted in the form of a mineral, mainly in Chile and Peru, and these two countries produce nearly 41% of the worldwide supply of copper between them. Therefore any events that affect these two countries and their relationship with other countries around the world may of course have repercussions on the production and exportation of copper and therefore influence the price of this popular commodity.

The current copper production in Chile, the highest producer, is stagnant which has influenced the importing countries to seek other copper suppliers.

Movements in the price of copper according to the demand:

Whereas Chile and Peru between them produce the majority of copper worldwide, China and Japan are the largest importers. Copper is in fact a highly used material in industry due to its resistance to corrosion and excellent electrical conductivity. It is therefore used in the manufacture of electrical equipment and electric cables as well as other industries and plumbing.

Copper can be used in its pure state or in the form of an alloy with zinc, nickel or aluminium.

The quotation for copper

The vast majority of trades in copper are completed on the London stock market, the LME or London Mercantile Exchange which provides daily quotations. Futures contracts, bonds and derived financial products from the LME which include the price of copper are all available for trading.

We also find copper on the American stock markets, the NYMEX or New York Mercantile Exchange to be more precise, as well as on the SFE stock exchange, or Shanghai Futures Exchange.

Several factors influence the price of copper on the stock markets. The major factor being the economic health of America as the United States is the largest consumer of copper. The value of the American dollar against other currencies, notably against the Euro, can also influence the price of copper, either positively or negatively. It is by using this fundamental indicator that we observe the most volatile movements in the price of copper.

Historically the price of copper experienced a strong upturn period from 2003 to 2006 with a historical peak of $8,800 per ton then another peak in 2008 at $8,884 per ton. It was only after 2008 with the fallout from the worldwide economic crisis that the price of copper started to fall. The current price of copper is fairly stable at around $3,000 per ton.

On which stock markets is copper traded?

As a commodity copper is mainly traded on the London Metal Exchange or LME with daily quotations. On this market we also find futures contracts and options on copper as well as financial derivative products based on the LME Index.

Other futures contracts and options on copper are traded on the New York Mercantile Exchange or NYMEX in the United States and on the Shanghai Futures Exchange in China.

Movements in the price of copper depend on several factors and mainly follow the world economic situation and particularly that of America. As with all commodities copper is influenced by the value of the American dollar as its price is quoted in that currency.