Copper Investing
Copper is a primary industrial metal used mainly in construction (electrical and plumbing) and in equipment and appliances associated with building facilities. Copper is an excellent conductor of electricity and very resistant to corrosion so is a natural choice for various types of electrical and communications wiring and for piping water and gas.
For the copper trader who focuses on financial markets related to the economy, copper futures are often considered an accurate barometer of economic growth. Changes in the demand for copper suggest an economic expansion or contraction is under way and has earned copper a degree as a doctor of economics. Copper Traders can monitor copper futures prices to determine how to invest in stocks or other financial markets or may consider trading copper futures based on the copper market predictions.
Copper Market: Copper Trading Prices and Rates
As with gold, the two primary markets for copper trading are in New York and London. The London Metal Exchange (LME) is the world’s major non-ferrous base metals market and the center of physical copper trading. The Comex division of the New York Mercantile Exchange (NYMEX) is a major center for copper futures trading.
- On the LME, copper is traded in 25-ton lots and quoted in U.S. dollars per ton.
- On Comex, copper is traded in lots of 25,000 pounds and quoted in U.S. cents per pound.
- Copper futures contracts on Comex are traded for all months.
- The minimum price fluctuation is $0.0005 per pound or $12.50 per contract.
- The Shanghai Exchange also trades copper in lots of 5 metric tons with prices quoted in Renminbi per metric ton.
Copper Futures News & Fundamentals
Copper is found in many parts of the world, usually in ore but sometimes in cubic crystal chunks (ānative copperā) such as near Lake Superior in Michigan. Ore is first mined, then put through a series of processes to refine and purify the copper.
The world produces about 15 million metric tons of copper annually, of which Chile accounts for about a third of all production. The United States is the second largest copper producer. Other large producers of copper include Peru, South Africa, Canada and Russia. Arizona accounts for about 65 percent of U.S. copper production although the largest U.S. copper mine is in Utah.
Scrap metal is also a significant source of copper supply as items that include copper are recycled for other uses.
The United States, Russia, and Japan are the three largest consumers of copper with growing demand from China. In the United States, building construction is the largest end-use market for copper products, accounting for a little less than half of total U.S. copper consumption. Electrical and electronic products account for nearly a fourth of U.S. copper consumption with transportation equipment, industrial machinery and equipment and consumer and general products each taking about 10 percent of the copper supply.
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Copper Trading Background
Copper has been an essential material for mankind since pre-historic times even the age or stages of human history is named for a copper alloy, bronze. Discoveries and inventions in the late 18th and early 19th centuries by Ampere, Faraday and Ohm names recognized today in electrical terminology brought copper into a new era as researchers discovered coppers excellent electrical conducting and heat transfer characteristics that played a key role in launching the Industrial Revolution.
Copper tradingĀ continues to be an important foundation for manufacturers and traders alike. In the last 100 years, industrial demand for refined copper has increased twenty fold as more developed regions of the world use copper as an important component of their infrastructures.
Copper is also well-known as the outer skin of the Statue of Liberty, which provides a good showcase of copper’s ability to withstand years of biting sea winds, driving rains and beating the sun.
Copper Trading Resources
Copper trading is covered in all major financial newspapers and publications, and copper traders have plenty of industry-related websites from which they can learn about copper production/consumption historically and currently. Among these resources are:
- American Copper Council, www.americancopper.org, a trade association representing all segments of the copper industry including producers, scrap dealers, brass and wire mills, fabricators, consumers, merchants and brokers. Incorporated in 1975, it has 120 member companies and focuses on education.
- International Wrought Copper Council, www.coppercouncil.org, a trade association for the copper fabricating industry founded in 1953 and including members worldwide.
- International Copper Association, www.copperinfo.com, an association of 38 leading copper producers formed in 1989 to coordinate and improve the effectiveness of the international market development, research, and technology activities of the copper industry.
- Cover Development Association, www.copper.org, an affiliate of the International Copper Association.
- Copper News, www.coppernews.com, part of the World News Network.
A major report for Comex copper futures traders is Copper ā High Grade Warehouse Stocks, which indicates whether copper supplies for possible delivery on the copper futures contract are increasing or decreasing.
How to Trade Copper
On the copper supply side, the key area to watch is Chile and, to a lesser extent, Peru and South Africa, where labor strikes, shipping problems and political unrest can disrupt mining operations and the production of copper.
On the copper demand side, the rate of new homes under construction, housing permits and any other reports related to housing as well as general commercial construction data are key factors for copper futures prices. U.S. traders may focus on U.S. housing statistics, but copper traders also should be watching reports for developing areas such as China, which has become a major user of copper and accounts for an increasing amount of demand for copper.
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