Falling oil prices could affect copper

This metal is considered vulnerable to the impact of low oil prices. Energy needs account for as much as 50 percent of the cost of producing copper, like other metals. This means that cheap oil should lead to lower production costs, which in turn should allow copper producers to have slightly higher revenues.

However, there is another side to this issue. It is worth noting that the decline in cost could pose a problem for copper. In theory, lower prices for any good should shield producers from higher costs by limiting price movement upward. However, if production costs continue to decline for a long time, and demand does not increase, an oversupply is created in the market, and the price continues to fall lower and lower. This is the same thing that happened to coal, experts explain.



However, the International Copper Research Group (ICSG) is not as confident about the growing copper surplus as others. While copper surplus is still forecast in the near term, it is worth noting that the ICSG has sharply cut its forecast.

Either way, investors will certainly be watching how cheap oil affects copper miners in order to respond in a timely manner in the exchange markets. While copper prices have been far from a breakthrough this year, issues such as the rise in impurities in copper concentrate and demand metrics are also noteworthy factors.