Factors influencing the price of copper in 2015

Analyst Jared Cummans wrote that copper is one of the oldest metals known to man and has been used as a currency for over 10,000 years. Now, this metal is key in industrial and construction industries, from electrical wiring and piping to heating and refrigeration equipment. Copper is now increasingly being used as a financial instrument, as copper is a favorite source for active traders who bet on copper, given the fast pace of price movements based on news.

Below, Jared Cummans summarizes the factors affecting the copper market and its price this year. Copper demand has grown in recent years, driven by urbanization in emerging markets such as China and India. They are expanding cities, increasing the need for new housing and transport infrastructure, which leads to an upsurge in construction. China is the main buyer of copper, and the health of the Chinese economy is the main driver of copper prices. Recently, however, copper has been quite difficult as construction slows down.

In the United States, residential construction is the main buyer of copper, which is used in pipes, wires, and other residential components. Copper prices fell during the recent economic downturn, when construction firms were hit hard. Related news and events from emerging markets and US numbers will be equally important in determining the price of copper. It should also be noted that the US data is much more frequent, especially housing data that comes in every few weeks commenting on changes in the corners of the economy.

Since a significant portion of the world's supply comes from South America, supply disruptions can also have a significant impact on world prices. Strikes in large copper mines are fairly common, and natural disasters such as earthquakes or landslides also occur from time to time. Chile and Peru together account for nearly 40 percent of the world's proven copper reserves and generate about 40 percent of the world's copper supply annually.

One factor is the possible replacement of copper with cheaper metals in some applications. For example, aluminum is currently replacing copper in power cables, electrical equipment, car radiators and refrigeration pipes, while titanium and steel are used in heat exchangers. However, to the extent that copper is replaced in a traditionally fulfilled role, it cannot bring down the price.