Copper

The price of copper has grown 56% in the last year and tripled in the last 5 years. One factor contributing to this trend is increased construction demand in China. As its middle-class, urban population grows, there is an upward pressure on the construction of factories, buildings and roads. For example, China now has 7000 steel factories- double the number it had in 2002. Overall, China has been responsible for 64% of the global demand for copper since 2003.NY Times article on Commodity Prices

Copper’s December price of $1.25 a pound is “in the past,” said Chile’s Mining Minister Santiago Gonzalez. December’s price was a four-year low, a result of tapering demand from China. Now, “China is buying large amounts of copper,” Gonzalez said to Bloomberg. “That’s part of copper’s recovery.”

Overall global demand for copper is unlikely to decline. Emerging economies will continue to build-out their infrastructure as the standard of living for their populations rise.

Supply constraints for copper will really begin to bite once recovery in the global economy gains traction and becomes more widespread. One possible sign of that happening is the statement from BHP made on July 22.

BHP stated that metal restocking was evident in the United States, Europe and Japan. Businesses have realized the position we’re in and have started to accumulate what they can.

Fears over limited supply have already pushed copper prices to a high for the year – at $5,500 a ton. Copper prices have risen in excess of 75 percent this year but remain almost 40 percent below the record $8930 reached in July 2008.

The copper market will pay a heavy price for the simultaneous price collapse and tightening in credit markets since September 2008.