From wiring and plumbing to coinage and electronics, copper is key for a range of applications. In fact, the metal is often said to have a PhD in economics, since its widespread use makes it a valuable indicator for the global economy. Knowing today’s price of copper is a helpful factor to consider when investors are taking a look at the bigger picture.
Copper has been on a significant upswing in 2017, and reached a three-year high of $6,872 per tonne in August before dropping off September. The metal’s major rally and drop can be partially attributed to changes in fundamentals, particularly in China.
That said, there are plenty of other factors affecting the copper price today, and investors keen on the base metal would do well to have an understanding of what they are. With that in mind, here’s a short overview of what’s going on with the copper price today, and what investors need to know.
Copper price today: Supply and demand
Chile is the world’s number-one copper producer, with Peru and China coming in a distant second and third. China also takes the lead on the demand side, accounting for over 40 percent of global demand. A spike in demand from China led to a run in the copper price from 2003 to 2008, and copper rose again from late 2008 to 2011 after dropping drastically in the wake of the 2008 global financial crisis.
Strong Chinese demand continues to play a role in the value of copper, and strong economic data from the country bolstered the metal’s price throughout August. Many analysts have noted, however, that Chinese demand has slowed as of late and is expected to continue along that trend in the short and mid-term.
Mine disruptions are another important influence on the copper price today. BHP Billiton’s (NYSE:BHP) Escondida mine in Chile faced a labor strike early in the year that halted production for several weeks, and Freeport McMoran’s (NYSE:FCX) Grasberg mine in Indonesia faced disruptions during a mining permit dispute with Indonesia’s government.
Supply concerns have since been alleviated as both mines are now operational, allowing production to continue in both countries.
Declining inventory through August helped lift the copper price, with Shanghai Futures Exchange and LME inventory both experiencing significant drops. COMEX stocks increased during the same period, and the declines in inventory were partially accounted for through the use of readily available scrap copper.
Many analysts approached copper’s steep price hike with a sense of skepticism. “[S]omething seems off about this recent rally, and we still remain skeptical of its strength and duration,” said Dane Davis of Barclays (LSE:BARC), noting that the market is “is overreacting to short-term conditions and ignoring several warning signs.”
Chad Morganlander of Stifel, Nicolaus & Co. noted that “[c]opper, really is riding a wave of speculative fervor.” Investor speculation over copper allowed the price to rise, but ultimately staged the metal for a market correction soon after.
The price of copper has seen some intense fluctuations, but has improved overall year-to-date, moving up roughly 20 percent.
Copper price today: What’s next?
Copper’s price outlook remains uncertain. While the metal has enjoyed a boost this year, Bloomberg notes that global copper demand growth is slowing. Stockpiles in the LME have also fluctuated heavily in a sawtooth pattern month-to-month throughout this year while mine supply is set to increase.
In the mid to long term there are a few developments that are worth nothing that may affect the outlook of copper. The Trump administration’s plans to invest $1 trillion in infrastructure have been mentioned, but whether the initiative will be successfully passed is unknown.
The burgeoning electric vehicle market is also expected to raise demand throughout the next decade while supply is expected to go up as major producing countries Chile and Peru ramp up investments and production.
This is an updated version of an article originally published by the Investing News Network in 2015.
Don’t forget to follow us @INN_Resource for real-time news updates.
Securities Disclosure: I, Sivansh Padhy, hold no direct investment interest in any company mentioned in this article.