Copper, one of the oldest commodities known to man, is a product that directly reflects the state of the world economy. It’s the world’s third most widely used metal after iron and aluminum, and is primarily used in highly cyclical industries such as construction and industrial machinery manufacturing. Profitable extraction of the metal depends on cost-efficient, high-volume mining techniques, and supply is sensitive to the political situation, particularly in those countries where copper mining is a government-controlled enterprise.
Copper was known to some of the oldest civilizations on record, and has a history of use that is at least 10,000 years old. Some estimates of copper’s discovery place this event around 9000 BC in the Middle East; others say that its name “copper” derives from the first place of mining, the Island “Cyprus”. However the origins, recorded fact is that copper was first worked about 7,000 years ago. Its softness, color, and presence in nature enabled it to be easily mined and fashioned into primitive utensils, tools, and weapons. Pure copper is bright red, hard and well malleable. Because of its mechanical-, physical- and chemical features, this heavy metal is used in numerous areas of life. Five thousand years ago, man learned to alloy copper with tin, producing bronze and giving rise to a new age.
By the mid-1800s, Britain, with superior smelting technology, controlled more than three-quarters of the world copper trade. As the proportion of metal to waste in rock declined, it became economical to position smelters and refiners adjacent to mining sites and ship the final product directly to market. The discovery in the 19th century of major copper deposits in North America, Chile, and Australia challenged England’s preeminent position. In the early 20th century, new mining and smelting techniques were developed in the United States which made it possible to process lower-grade ores, resulting in a dramatic global expansion of the copper market.
Copper is one of the most frequently processed metals in the industry. It owns an outstanding conductivity for electric current (only silver conducts even better), high resilience against any kind of corrosion and it is easily malleable. Copper is also used at the creation of brass (copper-zinc alloy) and bronze (copper-tin alloy), which both show a higher hardness than the base-metal itself.
About 75 % of the worldwide copper production are processed in the medical- and the electrical installation. Because copper is biostatic, bacteria cannot emerge on copper’s surface. To limit the spreading of germs, the metal is more and more used at the creation of groceries, in air conditions and it is even used in doorknobs. Even the importance of copper in the high-tech sector (such as in computer chips, solar panels, hybrid engines) is increasing.
The worldwide resources are guessed to be 2.3 billion tons, whereby only 12 % have been mined up to date. 1,6 billion tons are supposed onshore, further 700 million tons under the seabed. A characteristic feature of copper is that it can be recycled and reprocessed and it is therefore inexhaustible. More than on-tenth of the global copper production is so covered via energy-saving recycling of coppery scrap. Copper is mined worldwide; in China and the U.S.A. are currently the largest economically recoverable reserves. It is guessed that these reserves make about 20 % of the global reserves. 15.21 million tons of copper were produced in the year 2003. China was the biggest producer with a share of 35 % on the worldwide production, followed by Indonesia with 8.4 % and the U.S.A. with 8 %. There are other large mineral deposits in Australia, Peru, in the Caucasus Mountains, the Philippines, in Iran and in Spain, Portugal, Poland and Germany.
Because copper is predominantly used in the construction- and the electrical industry, the extent of the building activity in the industrial- and emerging countries – like currently especially China – is decisive for the demand. The demand for copper is higher than the supply since the beginning of 2003, the stock levels are therefore nearly completely exhausted by now. Furthermore, in the last years the copper processing industry shifted to the emerging countries. Example for that is the production of components for air conditions in China.
Trading in copper futures and options provides individual investors with an easy and convenient way to profit from changes in copper prices. In addition, a broad cross-section of companies – from copper mining operations to end users – can use copper futures and options contracts to protect themselves against adverse price changes.
Copper is the most traded industrial metal next to Aluminum and is traded at the London Metal Exchange (LME) and at the COMEX Division of the New York Mercantile Exchange (NYMEX). The quotation at the LME takes place in U.S. Dollar per ton, whereby a contract comprises 25,000 t. At the NYMEX the quotations takes place in U.S. Cent per American pound (lb.), whereby a contract comprises 25,000 lbs. (1 lb. = 0.453592 kg, 1 t = 2,204.62 lbs.).
Most important stock exchange centers: LME and NYMEX / COMEX
Contract-cycles: – LME: daily new, cash-delivery and 3 months contract, furthermore contracts with duration of up to 63 months.
Contract-cycles: – NYMEX: monthly, always 23 months in advance.
Contract-size: LME: 25 t., NYMEX: 25,000 lbs.
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