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Copper is not only a commodity, but also a vital metal for the industry that widely uses it in modern technology devices. Copper is used in 56% of devices in construction and electric network installations, car manufactures use copper in 56% of their products, while the consumer sector has copper in 21% of its devices. Pipes and electric wires, construction materials, car details - especially in electric vehicles - telecommunication networks, computers, medical equipment and consumer electronics – all these devices need copper. So, demand for copper may serve as an indication of industrial activity, and it is accepted by the investment community as a forward looking indicator of economic growth. It is also called “Doctor Copper” in this regard.
So, the asset has some unique features:
- The supply of copper depends on its production. Latin America is responsible for 40% of the global copper production. Chili is the largest copper producer with 28%. Peru produces 12% of copper. Asia, Europe, North America, and Africa contribute to the global production with almost an equal share from 11% to 15%. China produces 8% of copper and the United States covers 7%, while Australia has 5%. Natural disasters, geopolitical tensions, domestic regulations, especially in the South American continent, may affect global production dramatically. Long-term planning should include research of the conditions of large copper mines , and exploration perspectives;
- China is responsible for more than 50% of global demand for copper. Thus, economic development of China, its export and import numbers, affect copper prices;
- Some sectors are more important in terms of the demand for copper. Booming construction, car manufacturing, and green energy push copper prices up;
- As copper is a risky asset it is affected by risk appetite. The CBOE Volatility Index (VIX), stock indexes, like the S&P 500 broad market index and Nasdaq index, China’s A50, Shanghai Composite, and the Hang Seng index should be monitored to identify the appetite for risk, and possible movements of copper prices;
- Copper ETF’s may include physical metal prices, stock prices of copper producers, and some other copper-linked derivatives. Such investments are more diversified and less volatile. Major copper producers are Glencore, Freeport-McMoran Copper & Gold Inc., First Quantum Minerals Ltd, and Southern Copper Corporation.