Copper
Where would we be without copper? Well in theory probably still in the stone age, as we would not have had the Bronze Age yet. Copper was the first mineral man extracted from the earth to make utensils, weapons and tools and since the early days it has become invaluable.

Applications
Copper has a wide range of attributes which is why it has so many applications today. It was found to be a very efficient conductor of electricity and heat as well as being flexible, strong, durable and resistent to corrosion. As such it has been key to many of man's technological advances, the two biggest being telegraphic communications and electricity. But it is also widely used for heating, air conditioning, plumbing, roofing, brass fittings and for so much of the electrical environment we now take for granted: TV, radio, lighting, computers, mobile phones etc all require copper wiring, electrical leads, adapters, transformers and motors. Various copper compounds and chemicals are also used to protect plants and crops and to preserve wood. The break down of copper by use is as follows

Demand
Between 1900 and 2000, copper demand grew from 500,000 tonnes to around 13,000,000 tonnes, with growth accelerating since the 1950's. With some many widespread uses it is not surprising copper demand keeps growing and now with China, India and many other developing countries starting to industrialise and urbanise, demand is likely to grow from strength to strength. Per capita demand for copper rises as GDP per capita rises. Japan consumes around 12kg per capita, NorthAmerica consumers around 10kg per capita and Europe around 9kg per capita. The large populations of China, India, Eastern Europe and South America are all consuming less than 2kg per capita - this is a huge indicator of what lies ahead for copper demand.

Supply
Copper is not a particularly rare metal and it is produced in many countries, Chart 2 shows the geographical distribution of primary supply. Today copper supply is made up from two sources, the majority, 88%, comes from primary production, that new copper that is mined from the ground, but of growing importance is secondary supply which accounts for 12% of total refined copper supply. Secondary supply comes from recycling copper scrap.

Primary supply involves mining copper ores, which generally come in two forms, copper suphides or copper oxides. Depending on the type of ore mined, the ore is processed by one of two methods. Copper sulphide ore is first concentrated then smelted and then refined, each of these stages is a separate process and can be carried out at a different location. Whereas copper oxide ore is crushed and the copper is then extracted from the crushed ore by disolving the copper in acid and the collecting the copper from the acid via electrolysis. This process is called Solvent extraction-electrowinning, SXEW for short. SXEW accounts for some 15% of primary copper production.

Physical trade in Copper
Each stage of copper production is tradable, for example a copper mine may mine the ore and produce copper concentrate which it then sells on to a custom smelter, the smelter may then produce blister copper which is copper ingot of about 98% purity. However most of today's technologies require virtually pure copper, or copper of 99.95% purity. As a result, smelted copper needs to be refined. Copper scrap generally enters the copper production process just before the refinering stage.

Factors affecting copper prices
The wide production base means there are numberous factors that can affect production and therefore prices. In North and South America, production is often affected by labour unrest, in parts of Asia and Africa production can be affected by political unrest, take for example the closurse of the Bourgainville mine in Papua New Guinea and the decimation of production in Zambia. In addition, weather is an important factor affecting supply, with floods and droughts either hitting the production process or the transport of raw materials. New production also takes years to commission as the scale of mining is large, it takes enormous financing, requires endless environmental permissions and needs extensive infrastructure as well. All these factors make it hard for the market to balance supply and demand.

With such a large and diverse market it is little surprise that copper's fundamentals are continuously changing and as they do, so does the price.The copper prices changes constantly as the market attempts to balance supply and demand at any given time. These price fluctuations generate risk and opportunity to different participants in the market and the metal exchanges around the world provide the means for all those involved with the market to either hedge their risk or take on risk as an investor/speculator.

Copper Specification

LME Copper Grade A Futures Contract Specification

LME Copper Options Contract Specification

LME Traded Average Price Options Specification
 

COMEX Copper Futures

Shanghai Futures Exchange - Copper Cathode Contract Specifications