COPPER

In accordance with the regulations of Copper traded on COMEX.

Introduce

Copper is a ductile metal with high electrical and thermal conductivity. Pure copper is soft and malleable, the surface is orange-red. Copper is one of the important industrial metals because it is widely used as a conductor of heat and electricity; making construction materials, manufacturing electrical equipment and making alloys of various metals
Futures contracts are traded on the LME (London). In Vietnam, many companies that use copper as raw materials, such as manufacturing electric cables, regularly conduct hedging with copper futures contracts on the exchange. Individual investors are also very interested in copper price because it is directly affected by world economic fluctuations.

Special points

Copper is the second best conductor of electricity after silver. With reasonable price and flexibility, copper is commonly used as a conductor of electricity and heat such as wires, electrodes, electromagnets, electric motors, etc.

Figure 1. Production of electric wires and cables

Copper is one of the few metals that occurs naturally in a metal form that can be used directly instead of having to be mined from ore. Therefore, it was exploited by humans very early, about 8000 BC.

Exploit

Copper is mined or extracted as copper sulfide from ores extracted from the mine. The average copper content in the ore is only 0.4-1%. After that, the ore is crushed and ground and calcined with other substances to remove iron and sulfide. The product is then electrolyzed and electrically purified to produce pure copper.
Copper is 100% recyclable with no loss in quality. It is estimated that up to 80% of the currently mined copper is still in use. The copper recycling process requires less work than the extraction of copper from the ore. Recycled copper is a major source of copper in the modern world.
To date, about 700 million tons of copper have been mined around the world, worth over $4 trillion. Mines have been identified with reserves of about 2.1 billion tons of copper. Of which, about 65% are found in 5 countries: Chile, Australia, Peru, Mexico and the US.

Production and export

Chile is the leading country in copper mining output with 5.5 million tons in 2017 (accounting for 27.6% of global production). Chile is also home to 3 of the 10 largest copper mines in the world,   of which the largest is  Escondida located in the Atacama desert (Figure 3). In 2018, this mine produced 1.21 million tons, more than double the second-ranked mine.

Figure 2. Top copper producing countries in the world in 2017

Figure 3. The world's largest copper mine Escondida, Chile

In 2017, copper import and export value was worth 58.8 billion USD. Two South American countries, Chile and Peru, account for 49% of export value. Chile exported $16.6 billion, while Peru exported $12 billion. (Figure 3)

Figure 4. Countries with the highest copper export value in 2017. Source OEC

On the import side, Asian countries import the largest amount of copper. In which, China imported about 25 billion USD, accounting for about 43%, mainly from Peru and Chile. Followed by Japan, India, and Korea. (Figure 4)

Figure 4. Countries with the highest copper import value in 2017. Source OEC

Factors affecting copper futures contract

* Supply and demand of copper:  Copper is a metal that is easy to mine and process. Because the cost of metal mining is quite large, almost all metal mining is done by large mining corporations in the world. Despite the high production costs, however, copper mines still account for about 80% of the total annual refined copper output, with the remaining 20% ​​coming from recycled scrap sources.
* Mining output:  Among the 20 largest copper mines in the world, most of the mines are mainly concentrated in Chile and Peru. The exploitation will depend on many factors such as tax rates, mining regulations of the host country government, mining techniques of the investor. In addition, copper mining is also affected by unforeseen factors such as workers' strikes, earthquakes, and bad weather.
* Copper scrap:  In addition to the output of copper mined from mines, the supply of copper in the market is also affected by copper scrap.
* Passive consumption demand:   Copper metal is used to make many tools, from industrial equipment to household appliances. Copper household appliances are used and sold a lot in the world. In addition, because copper is an efficient conductor of heat and electricity, it is also used in the installation, energy, and telecommunications sectors.
* Economic growth:  During the period of good economic growth, the demand for industrial housing increases, businesses invest in expanding production. This is a factor that increases the demand for copper in the market, thereby affecting the price of copper.
* Price of Substitute Base Metals:  Copper price is affected by the price of copper substitute base metals such as aluminum, nickel, lead and iron. Because when the price of base metals is lower than the price of copper, it can lead to the use of those metals to replace copper to save production costs.
* USD price:  The USD price will have an inverse relationship with the prices of all kinds of goods. Copper is also a commodity affected by fluctuations in the price of USD, when the price of USD increases, the price of copper tends to decrease.
* Oil price:  Copper cannot be used in its raw form, copper after mining will be refined to remove unwanted materials before it can be used. Work | Copper smelting is an energy intensive process. Energy costs account for about 30% of the total cost of mining and processing ore. When the price of oil increases, the cost | mining and processing of ore increases, leading to an increase in the price of copper.
* Other factors:  In addition to the above factors, the copper futures contract price is also influenced by other factors such as information on macro, government policies in copper mining countries or transit time. moved on. Understanding the factors affecting the price of copper will help investors analyze copper futures price movements in the market and come up with effective investment strategies.