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.
Share/SaveMolybdenum is a silvery-white, hard, malleable, metallic element with the atomic number 42. Molybdenum melts at about 2,610 °C and boils at about 4,640 °C. Swedish chemist Carl Wilhelm Scheele discovered molybdenum in 1778.
Molybdenum occurs in nature in the form of molybdenite and wulfenite. Contributing to the growth of plants, it is an important trace element in soils. Approximately 70% of the world supply of molybdenum is obtained as a by-product of copper mining. Molybdenum is chiefly used as an alloy to strengthen steel and resist corrosion. It is used for structural work, aircraft parts, and forged automobile parts because it withstands high temperatures and pressures and adds strength. Other uses include lubricants, a refractory metal in chemical applications, electron tubing, and it also finds usage in oil processing as catalyst for sulfur-removal.
World production of molybdenum in 2001 fell –2.3% to 130,000 metric tons from 133,000 metric tons in 2000. The world’s largest producers of molybdenum are the U.S.A. with 28.9% of world production, Chile with 25.4%, and China with 21.7%. Chile’s production has increased sharply in recent years and its 2001 production level of 33,000 metric tons was more than double that seen 10 years earlier.
US production of molybdenum concentrate in 2001 fell –8.1% to an 8-year low of 37,600 metric tons. US production of molybdenum primary products in 2001 fell –20.3% to 15,700 metric tons, with 14,900 metric tons of that production in molybdic oxide and 771 metric tons in molybdenum metal powder.
US consumption of molybdenum concentrate fell –1.5% to 33,300 metric tons in 2001 from 33,800 metric tons in 2000. US consumption of molybdenum concentrate has more than doubled over the last 10 years. US consumption of molybdenum primary products fell by 11.5% to 16,200 metric tons in 2001 from 18,300 metric tons in 2000.
US imports of molybdenum concentrate for consumption in 2001 fell –1.8% to 6,010 metric tons from 6,120 metric tons in 2000.
In several analysts’ opinion, molybdenum should assert itself on the market in 2009 better than other industrial metals. The supply keeps being narrow while the demand is increasing even with that global financial crisis, they say. Though the need for steel and oil may decrease at a economical downward tendency, the demand will still exceed the supply. The yearly produced 400 million pounds of that metal are largely consumed. It is reckoned that the need will increase with 5 to 7 %. The mining specialist Stefan Ioannou from Haywood Securities determines that the growth rather will stay at the end of that named margin – or even fall to 4 % contingent on the current turbulences. In any case, there will be a positive development, he said. Bart Melek from BMO Capital Markets sees one more indication that the financial crisis could bound the supply’s growth in the whole metal sector – including molybdenum – in the (for the producers) difficult procurement of floating capital to finance planned intentions. Meanwhile copper-mining has to be done from deeper and deeper stratums with consequently higher technical and financial effort, which causes that the supplies’ expectations are chastened. The price for molybdenum is still moving distinctly above the mines’ break even point. Molybdenum could additionally come under pricing pressure when China’s demand decreases and the trading houses as well as the fabricators deplete their stocks to save their available cash in this financial crisis. Catherine Virga from the CPM Group defers however to the current low stocks and that the demand therefore will exceed the supply. Molybdenum is going to hold up better in pricing compared to other industrial metals. Phil Newman from CRY Strategies sees molybdenum even as a “potential star”.
In response to industry demand for an exchange based price risk mechanism the London Metal Exchange (LME) will commence trading molybdenum futures in February 2010. Molybdenum will be traded in the Ring, on Select and the inter-office telephone market. Official Prices that reflect the underlying supply and demand in the physical market are determined in the Ring and can be used by the Industry as a reference price.
Trading features
- Daily prompts to 3 months, weekly to 6 months, monthly to 15 months
- Trading via Ring, Select and Telephone
- 1 Ring per day shared between cobalt and molybdenum at 12:20 p.m.
- Kerb trading daily
- Physically settled
- Launch date February 2010
Delivery points in Rotterdam, Baltimore, Singapore
Proposed LME Molybdenum Futures Specification (MO)
- Lot size: 6 tons of molybdenum delivered in 10 tons of roasted molybdenum concentrates
- Deliverable in 100, 200 or 250 kg drums
- Impurity levels:
- Copper (0.50%)
- Sulfur (0.10%)
- Carbon (0.10%)
- Phosphorous (0.05%)
- Lead (0.05%)
Roasted molybdenum concentrates deliverable with a molybdenum content of 57-63 percent.
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