Commodities: Copper

Copper has been used for thousands of years and was the first metal to be used by humans. It’s similar to silver and gold in that it’s very ductile, malleable and is a good conductor of electricity. Unlike the precious metals, however, copper is relatively inexpensive, making it attractive for numerous industrial applications, including wiring, plumbing, circuitry, generators, motors, vehicle radiators, and home heating and cooling systems.

Contract Specifications

Production        

Found in ore deposits around the world, copper is extracted using two basic mining methods: open pit and underground mining. Open-pit mining is the most widely used technique. It’s accomplished by creating terraces that gradually reach deeper into the earth’s surface. In underground mining, miners dig vertical shafts and horizontal tunnels to reach copper ore that’s not near the surface. With either method, the mined ore must be removed from the mine and transported to a plant for processing and refining. Top producers include Chile, China, Peru, the U.S. and the Democratic Republic of Congo. In the U.S., copper production largely comes from deposits in Arizona, Utah, New Mexico, Nevada and Montana.

Price Drivers

The price of copper is driven by numerous factors, including:

• the strength of the U.S. dollar
• oil prices (copper refining is an energy-intensive process)
• collateral demand from China
• extraction costs
• unforeseen events (e.g., worker strikes, earthquakes, geopolitical instability)