Investors know copper as Dr. Copper due to its ability to predict the economic health of the global economy. Lets dive down to some details to understand what kind of factors affect the price of copper
The US Dollar is the reserve currency of the world and tend to be the most stable foreign exchange instrument. It is the benchmark pricing mechanism for most commodities. In layman’s term, a decrease in the currency of the US Dollar relative to a commodity’s buyer currency will allow the buyer to spend lesser to buy the same amount of commodity. Therefore, the purchasing power of any buyer due to the fluctuation of the US dollar could play an important factor in driving the supply and demand curve of copper.
Energy makes up to as much as 50% of the production of metals. When oil prices rise, it cost more to produce copper and the price of it will increase as well.
Demand from China
As one of the largest economies of the world, China is also the global leading consumer of copper. Copper reached to its peak during the 2008 Beijing Olympics at a rate of SGD $13++/kg as China was importing copper from all over the world to improve its infrastructures and building mega hotels and cities to cater to the tourists.
Chile produces the largest amount of copper through mining. The supply of copper ores, the quality of the ores and the costs of extracting them also have an impact on the copper price. Meanwhile, unforeseen events like worker strikes, earthquakes, bad weather and geopolitical instability can force copper prices upwards.
Reduce usage due to substitution
Aluminium has been used to replace copper in electrical wiring due to its flexibility, durability and low price. Also, aluminium is used in power cables, electrical types of equipment and refrigerator