7 Basic Facts of Copper for Investors

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What is Copper?

Like several other base metals, most distinguishing quality of copper is its reddish-brown colour. The word ‘copper’ originates from the Latin word “Cuprum” after the island of Cyprus. Copper was discovered in Ancient Times and used by the ancient Egyptians, Greeks, Romans and Chinese. According to some old people sayings copper is probably the very first metal mined & crafted by humans. Some sources suggest that copper tubes were used by the Ancient Egyptians to carry water in around 2750BC.

It’s a chemical metal with symbol Cu and come in the same category of precious metals like silver (Ag) & gold (Au). These metals are the first three discovered elements and occur naturally in the elemental form. Copper in its pure form is soft with very high thermal and electrical conductivity. According to these characteristics it is ideal to use in alloys that are essential in several industries including construction and manufacturing.

Use of Copper

Copper is largely used in construction worldwide. According to an analysis, almost half of all copper is used in this very industry. On average a house contains more than 400 pounds of copper in appliances, pipes and wiring while a motor car contains around 50 pounds of copper in its breaks, motor and connectors.

The second largest market of copper is the electronics and electrical space due to its excellent conductivity

In Ancient period, copper was used as coins in many countries. Also some people use copper accessories in their home and kitchen because copper has antimicrobial properties which reduce the transfer of germs and disease.

Use of Copper in Gold: Pure gold is so soft that you can reshape it just with your hands, which is why gold jewellery is actually a mixture of gold, copper and silver.  It was forbidden in Europe to alloy gold with metals other than copper and silver until 19th century.

Copper Alloys: Copper is well known for its allowing capacity. Like if you mix copper with zinc, you’ll get brass, copper with tin makes Bronze.

Who uses Copper Most?

Global consumption of refined copper goes over 21 million tons and is distributed into 5 major consumption groups: equipment, construction, infrastructure, transport, and industrial. China has topped the list, in terms of consumption several times, including in 2017 when Asia was proclaimed to be the largest consumer of copper (refined) at 11.8 million tons. Japan and Spain at number 2 and 3 respectively followed the list. In terms of imports USA and Italy took 2nd and 3rd spots respectively after China.

Who Decides the Price of Copper?

Copper’s price is set by free market. Suppliers, producers & customers balance production, extraction and distribution costs with demand. Two exchanges where copper is commonly traded are the COMEX and the London Metal Exchange.

Who Produces Copper the Most?

Largest copper miner of the world is Chile with 5.8 million metric tons of production. Peru stands second with 2.4 million metric tons. Codelco from Chile is the largest copper producing company, though as it is a state owned organization, investors are not allowed to put money into it.

Other top producers are China with 1.6 million metric tons, Democratic Republic of Congo (DRC) and United States with 1.2 million metric tons, Australia with 950,000 metric tons, Zambia with 870,000 metric tons, Indonesia with 780,000 metric tons, Mexico with 760,000 metric tons and Russia with 710,000 metric tons.

How to Invest in Copper?

There are several different options available to invest in copper including:

  • Physical Copper: Though obtaining physical copper has outworn but still there are options of investment in physical copper through copper bar, bullion or coins. While keeping these can be quite challenging yet holding physical copper is the cheapest investment option.
  • Copper Bullion: Investors can buy copper bullion bars and coins from metal dealers in the same way they purchase gold and silver bullions from online or offline vendors. Copper bullions are available in various quantity and sizes, though investment grade copper is extra refined (0.9999 copper).
  • Stocks: Purchasing shares of the companies involved in mining the metal is more direct option to access the copper prices.
  • Exchange Traded Funds: Indirectly investors can access the copper market through Exchange Traded Funds (ETF’s). We can buy and sell Exchange Traded Funds (ETF), in the same way we deal with company stocks. There are many ETF’s in the market that investors can use to make profit from a rise or fall in copper price.

Is it Worth Investing in Copper?

Copper is a precious metal with constant demand in industry. As a result, copper prices are likely to rise in the future. Currently prices of copper are quite contingent on trade talks between USA and China with optimism towards a possible deal having recently boosted demand & pricing. Also the price of copper is lower than precious metals like gold and silver and it provides investors a unique opportunity to invest in metals within their budget.