Copper prices have been bouncing back after a downtrend from 2011 to early 2015, and interestingly the story looks much the same long term — prices have increased dramatically in the last few decades.
Case in point: spot COMEX copper prices have risen roughly 23 percent over the past year, but have gained 208 percent since 2000. Although this major increase doesn’t account for inflation, it is still a sizable gain. What’s more, copper prices were more or less on the rise during the latter half of the 20th century as well.
So what’s the best way to view historical copper prices? According to Stefan Ioannou of Cormark Securities, it’s most pragmatic to look at historical copper prices since the 1970s or 1980s. That’s because of one key factor that brought major changes to the industry: the rise of modern heap-leach technology. Leaching has long been used in mining operations, but according to this paper, the method in its modern form didn’t start gaining popularity until around 1980.
“That fundamentally changed the way we mine copper,” Ioannou said. “Up until then, a lot of copper mining was for the most part focused on sulfide mineralization producing a copper concentrate that you’d send to a smelter. With heap-leach technology, all of a sudden the giant porphyries [and] the oxidized caps associated with large porphyries down in South America became viable.”
That sounds like good news for increasing copper supply, but as Ioannou noted, large-scale deposits are often low grade, meaning that they’re more costly to mine despite relatively cheap heap-leaching methods. That’s no doubt had an effect on copper prices.
“The change we’ve seen in the industry is that the price of copper has gone up … because the cost to produce a pound of copper has gone up. They sort of go hand in hand,” he said.
While Ioannou stated that supply and demand dynamics are the main driver behind copper prices, he also noted that grades and production costs are factors as well. Demand for copper keeps growing, and he suggested that since “the low-hanging fruit has been mined,” miners must increasingly go after more difficult, large, low-grade and costly deposits to meet that need.
“The price of copper dictates how low you can go on the grade,” he said, “Back pre-1970s, I’m guessing a lot of copper was coming from a lot higher-grade mines … as we’ve been mining more and more of these large-scale deposits that are low grade, the cost on a per-pound basis has gone up.”
What else has driven changes in historical copper prices?
Many supply and demand factors have contributed to the movement of historical copper prices over the years. For example, a report from the US Geological Survey notes that the Vietnam War meant strong demand in the mid-1960s and early 1970s, leading to price controls to limit rising domestic copper prices.
Global demand for copper is currently dominated by China. Those following the resource market will no doubt remember a large spike in demand from China that sent prices for copper and other commodities soaring in recent years. While China is still a strong copper demand driver, it is expected to slow due to projections of a slowing economy and a reduction in the country’s credit rating.
Aside from the most recent commodities price rout, the US Geological Survey states that in 1998, “[t]he constant dollar copper price in 1998 fell to the lowest level since the Great Depression of the 1930s,” while an earlier production boom in the 1980s led prices to fall on the back of resulting oversupply.
What’s next for copper?
Interestingly, some take another view on the historical performance of the copper price. Richard Schodde, managing director at MinEx Consulting, gave a presentation on the subject back in 2010 that looks at a longer time frame. On that scale, historical copper prices have actually dropped significantly.
Schodde told the Investing News Network by email that real copper prices have dropped 50 percent over the past 100 years, and that production costs have also fallen due to economies of scale and advances in mining and processing technologies.
That might not sound like good news for copper, but Schodde views the drop as a good thing overall. He predicts that the industry will continue to innovate in order to exploit lower-grade deposits and meet growing global demand for copper.
In the short term, copper prices have increased moderately, rising only 4 percent this year. Copper price forecasts are split due to market uncertainties created by US economic policy, shifting Chinese demand and the potential for strikes at many mines.
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This is an updated version of an article originally published by the Investing News Network in 2015.
Securities Disclosure: I, Sivansh Padhy, hold no direct investment interest in any company mentioned in this article.