Want to learn about copper as a commodity?
In this guide, we explain what copper is used for and why it’s considered an important metal in every day and industrial use.
Copper prices are driven by more practical means than particular speculative aspects of precious metal prices like gold and silver — we cover the copper price influences in this article.
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What Is Copper?
Copper is one of the most widely used metals both commercially. The shiny, reddish-orange element is believed to be the first metal used by humans thousands of years ago.
In modern society, copper plays a vital role in everyday life. Its physical properties, which are similar to gold and silver, make it perfectly suited for a range of industrial uses including electric wiring, plumbing, roofing, and industrial machinery.
Copper is soft, pliable and malleable, and it conducts heat and electricity very well. However, unlike gold and silver, copper is not widely viewed as a store of value. Therefore, copper is less impacted by speculative price movements.
The global supply of copper comes principally from underground mines and from recycling copper products.
Where Does Copper Come From?
There are several sources for industrial copper. The two main ways to obtain copper are mining and recycling.
Copper Extraction From Underground Mines
Miners extract copper from ore deposits found in underground or open pit mines.
Successful copper mining requires concentrated ore, which can be ground into fine material. The copper is then separated from waste materials and is then refined further through the smelting process.
Although copper has been used by humans for many centuries, more than 95% of all the copper ever mined and smelted has been extracted after 1900.
Largest Copper Producing Countries
In 2017, annual copper mining exceeded 19 million tons.
South America has the most copper mines, and China is the source of the greatest production of refined copper. Copper is mined in countries all over the world, with the following countries accounting for most of the mining:
|Rank||Flag||Country||Copper Produced (Thousand Tons)|
|#6||Democratic Republic of Congo||910|
Producing Copper Through Recycling
Fabricating operations including brass mills, copper smelters, refiners, and ingot makers all serve as sources for recycled copper.
Demand for copper has steadily grown over the years as the global economy has expanded. Developing nations have increased their demand for copper as their infrastructure needs have expanded.
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The main consumers of copper are China, Russia, the European Union, the United States, and Japan. China, Russia along with several Eastern European countries.
These aforementioned nations have experienced the largest increases in copper demand and are likely to be big determinants of copper demand in the future.
Which Industries Demand The Most Copper?
The vast majority of copper demand derives from the following industries:
- Building Construction – These applications include electrical wiring, plumbing, and weatherproofing of homes and commercial buildings.
- Transportation Equipment – Copper’s excellent conductivity makes it an important component in electric motors.
- Electric and Electronic Products – Integrated circuits and printed circuit boards use copper because of its excellent electrical conductivity properties. Copper is also found in electromagnets, vacuum tubes, cathode ray tubes, and magnetrons in microwave ovens
- Consumer and General Products – Copper has strong anti-microbial properties and the US Environmental Protection Agency has approved the registration of certain copper alloys for anti-microbial materials including cookware, bed rails, handrails, and doorknobs. Copper is also used in many musical instruments.
- Industrial Machinery and Equipment – Copper is used in stills for producing whisky and in glassmaking, engraving, and printing equipment.
What Drives Copper Prices?
Copper has many uses in a diverse array of industries.
Therefore, its price is a good barometer for the overall strength of the global economy. The following four areas represent the biggest determinants of copper prices:
- Emerging Markets
- US Housing Market
- Supply Disruptions
Emerging Markets Demanding Copper
Because infrastructure represents such an important part of the demand, emerging markets are a key driver of copper prices. Fast-growing countries such as India and China are accumulating vast amounts of wealth as their economies grow.
As a result, they have a growing need for housing and transportation infrastructure, and other types of construction.
Not surprisingly, Asia comprises an increasing share of global copper demand.
The price of copper may depend greatly on the ability of these countries, as well as other emerging economies like Brazil, to continue to grow. A growth slowdown in emerging economies will almost certainly have a negative effect on copper prices.
Copper Demand By The US Housing Market
The US homebuilding industry uses copper in electrical wiring, roofing, plumbing fixtures and insulation among other things.
Therefore, factors that affect US housing demand, including nonfarm payrolls, mortgage rates, US gross domestic product (GDP), and demographics, play an important role in determining copper demand.
The building construction industry comprises almost half of copper use in the United States. Investors should pay close attention to trends in this market for clues about future copper prices.
Copper Supply Disruptions
Political, environmental, and labor issues can have a big impact on copper prices. South America produces a significant amount of the overall supply of copper, particularly in Chile and Peru.
Historically, countries in this region have at times chosen governments that have nationalized the mining industry, such as in Bolivia in 2007. Such events can disrupt supplies and lead to higher prices.
Events such as miner strikes can also produce supply disruptions and higher prices.
Finally, events such as earthquakes and landslides can slow down mining output. Copper traders should pay attention to geopolitical news and natural disasters that affect the mining industry.
Substitution: Alternative Metals To Copper
The economic principle of substitution represents a risk of investing in any commodity, and copper is no exception. As prices climb, buyers will seek cheaper substitutions, if available.
Cheaper metals such as aluminum now substitute for copper in power cables, electrical equipment and refrigeration equipment.
Where Can You Trade Copper?
Interested in trading commodities like Copper? Start your research with reviews of these regulated brokers available in .
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. <b>Between 74%-89% of retail investor accounts lose money when trading CFDs.</b> You should consider whether you can afford to take the high risk of losing your money.
If you found this general commodity guide on copper helpful, see our articles on:
- How iron ore is mined and processed
- The production and price drivers of tin
- What roles aluminum plays in commercial industries
- The types of precious and base metals
To learn more about copper and ways you can trade it, take a look at this Copper Trading Guide where we also include a list of regulated brokers in .