What copper facts are important for investors? The metal’s relationship with human development is longstanding. From its use in plumbing in
ancient Egyptian civilizations
to being an essential component of power generation, copper has been an “electric” metal for millennia.
Considered a tertiary commodity compared to the shinier appeal of
gold
and
silver
, copper is often the third choice for metals-focused investors during economic uncertainty. Today, copper is the
third most used metal in the world
and plays a pivotal role in all major economies and in the developing world.
Here are some basic copper facts for investors looking to get into the copper
resource
space.
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1. What is copper?
One of many
base metals
, copper’s most distinctive quality is its reddish-orange color. Despite being known as a base metal, it has the symbol Cu on the periodic table and is found in the same group as
precious metals
silver (Ag) and gold (Au). These precious metals were among
the first elements discovered
, as all three occur naturally in elemental form.
In pure form, copper is soft with very high thermal and electrical conductivity. These characteristics mean it is popular for use in alloys that are vital in many industries, including manufacturing and construction, similar to its sister metal
zinc
.
2. What is copper used for?
A key copper fact is that construction is the metal’s largest application worldwide. It is estimated that
nearly half of all
copper supply is used by the construction industry. A home can contain on average
439 pounds of copper
in copper wire, pipes and appliances due to its corrosion resistance, while a car can contain 50 pounds of copper in its motor, connectors and brakes.
Because homes are so reliant on the semi-precious metal, copper prices are tied to the
health of housing markets
. The second largest market for copper is the electrical and electronics space due to the metal’s excellent electrical conductivity. This arena now includes
electric vehicles
.
3. Who uses the most copper?
In terms of consumption, China has taken the top spot several times, including in 2020, when the Asian nation was
the largest consumer of refined copper
at 11.98 million metric tons (MT).
The country also ranks number one on a
2019 list
of copper ore and concentrate importers, with Japan and South Korea following behind.
Refined copper
imports in 2019 were the same story, though the United States and Germany took the second and third spots, respectively.
Click here
to learn more copper facts about the refining process.
4. Who sets the price of copper?
What is copper priced at and who decides? The price of copper is set by the free market. Producers, suppliers and customers balance extraction, copper production and distribution costs with demand.
Two common exchanges
where copper is traded are the London Metal Exchange and the COMEX.
Copper is heavily consumed, but it is also heavily traded, which can lead to price volatility as large orders come in and out of the market. As with many commodities, copper is also
traded on the futures market
, which gives investors and consumers the opportunity to hedge against copper metal price changes.
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5. Who produces the most copper?
Chile, at 5.7 million MT, is
the world’s largest copper miner
, producing more than double the amount of the next highest producer, Peru, at 2.2 million MT in 2020. Chile’s state-owned mining company Codelco is the
top copper-producing company
. Chile also has the highest
copper reserves at 200 million MT.
The next largest copper-mining companies are Glencore (LSE:
GLEN
,OTC Pink:GLCNF) and BHP (ASX:
BHP
,NYSE:BHP,LSE:BHP), which produced 1.26 million pounds and 1.21 million MT of copper supply in 2020, respectively.
Also producing more than 1 million MT per year of mined copper is Freeport-McMoRan (NYSE:
FCX
), which delivered over 1.08 million MT in 2020. Other key players in the world’s copper market that own or operate copper mines or copper deposits include Southern Copper (NYSE:
SCCO
), Rio Tinto (LSE:
RIO
,NYSE:RIO,ASX:RIO) and Anglo American (LSE:
AAL
,OTCQX:AAUKF).
6. How to invest in copper
For copper resource investors looking to enter the copper market, there are a number of options:
-
Physical copper
: The time to obtain physical copper from pennies has long since passed, but there are still options for investors to own physical copper or copper bullion through bars or collectible coins. While storing these large materials can prove challenging, owning physical copper might be the cheapest option for investors.
-
Stocks
: To access copper prices more directly, investors can purchase shares of companies engaged in mining the metal. These stocks demonstrate a strong correlation to spot prices.
-
ETFs
: Alternatively, investors have the option of accessing the copper market indirectly by looking at exchange-traded funds (ETFs) focused on the red metal or at companies that mine the metal.
-
Futures
: As mentioned, copper futures are a popular way to hedge risk while getting exposure to the metal. There are a few exchanges where trading copper futures is possible, including the London Metal Exchange.
7. Is copper worth investing in?
For the time being, copper prices
remain somewhat contingent
on trade talks between China and the United States, with optimism about a possible deal recently boosting demand and pricing.
Analysts in the space are currently concerned with copper’s supply, as a dwindling pipeline of mine projects in production has some
worried about a potential shortage
. However, that sentiment is commonly accompanied by the notion that a deficit is still a ways off; in the meantime, copper’s presence in the electric vehicle revolution is set to continue pushing demand for the foreseeable future.
This is an updated version of an article first published by the Investing News Network in 2016.
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for real-time news updates.
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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