This ductile metal is famed for its thermal and electrical conductivity and graces all kinds of products in homes and commercial applications. Over thousands of years, copper and its alloys have been present in civilization and contributed to the history of humankind. In fact, when alloyed with tin to become bronze, copper gave rise to a new era in development. Contracts on copper and copper futures are traded around the world, but the following specifications refer to the CME Group copper futures contract.
Contract Size: 25,000 pounds
Price Quote & Tick Size: US cents per pound; minimum tick size is in multiples of five one-hundredths of one cent (0.05¢ or $0.0005) per pound, equivalent to $12.50 per contract. A fluctuation of one cent (1¢ or $0.01) is equivalent to $250 per contract.
Contract Months: Open outcry trading is conducted from 8:10 AM until 1:00 PM ET.
Trading Specs: Electronic trading is conducted via the CME Globex® trading platform from 6:00 PM Sundays through 5:15 PM Fridays, Eastern Time, with a 45-minute break each day between 5:15 PM and 6:00 PM.
Daily Price Limit: As of date of initial publishing, there were no daily limits; however, it is wise to consult the exchange.
Trading Symbols: HG
Past performance is not indicative of future results.
***chart courtesy of Gecko Software
Native copper has likely been smelted for several thousand years and appears to have occurred independently in several parts of the world. Bronze and brass from copper alloys are nearly as old with examples found in ancient Sumerian and Egyptian cities. Fresh pink or peachy copper oxidizes on the surface and appears greenish meaning, like gold, copper has a unique natural coloring which sets it apart from the other silvery or grey metals.
Copper smelters may now be found across the globe per the following map:
Easily worked into shapes or pulled into wire, copper has excellent corrosion resistance as evidenced in ancient pipes and artifacts. Copper is second only to silver in terms of its electrical conductivity but because of its relative availability in most areas of the world, the historically lower price of copper has made it the main choice for electrical applications. Copper also enjoys the benefit of being antimicrobial - making copper alloys a top choice for doorknobs that mostly disinfect themselves within eight hours. Ancient people often used copper to disinfect wounds and Hippocrates used it to treat leg ulcers. Copper is also important for plants and animals and occurs in human bone, liver, and muscle.
Open pit mines are the main source of primary copper and once the ore has been extracted, smelting and refining can begin.
***Image courtesy of ICSG
***Image courtesy of ICSG
Copper can also be recycled and this secondary copper is virtually indistinguishable from primary copper.
***Images courtesy of ICSG
Price highlights for this market include:
* In 1936, the Pittsburgh Press reported that armament makers feared copper shortages amid growing industrial demand. At that time prices were round 11 cents a pound.
* Climbing prices in 1965 led to the planned release of nearly 200,000 tons from copper stockpiles and suspension of import duties. Prices had risen amid concern of a world shortage of copper. Speculative market prices were close to 70 cents a pound at that time.
* By 1970 one of the leading copper producers in the US was holding their prices around 59 cents per pound.
* In 1973 strong world demand for copper brought prices higher, with most producers in the US and Canada bringing prices up to 67 cents per pound. By 1974 firms were raising prices to 82 cents or more per pound.
* Through 1974 and into 1975 prices saw a steep decline amid overproduction, dropping back towards 59 cents per pound. Pressure came specifically from Japan when they began earnest exports of their copper surplus. In an effort to reproduce what OPEC did for oil, some of the world's top copper producers (including Chile, Zambia, and Peru) had called for output limits to help push prices higher.
* Copper prices climbed back towards $1.00 per pound towards the end of the decade, helped along by inflation and general interest in metals investment. By 1980, prices were reaching fresh records above $1.40 per pound boosted by mine worker strikes in Peru.
* Recession in 1982 weighed on copper demand and depressed prices. Some mining in Arizona was halted when prices reached 74 cents a pound since production costs were closer to 80 cents - $1.25 per pound.
* Prices remained low until 1988 when strikes in Peru, tight supplies, and stronger copper demand pushed prices back towards $1.40 per pound. In December of that year, news releases showed that 5,254 tons of copper were in licensed Comex warehouses while 6,621 contracts were still outstanding. This bumped prices up to fresh records at more than $1.60 per pound.
* Increasing supplies through the next few years kept nearly steady pressure on prices, finally seeing them dip below $1 per pound in 1993. Weak demand and sales from China contributed. The following year, prices rebounded on strong demand fueled by home builders.
* The next big move above $1.50 came in 2005 on the heels of rumors of a large short position in copper - nearly 200,000 tons.
* Copper prices continued to set fresh highs over the next few years, carried over $3, $3.50, and $4 per pound as soaring homebuilding, climbing Chinese demand, and various Chilean and Mexican mine strikes supported gains.
* Prices retreated sharply in 2008 as the credit crisis and housing collapse began to unfold. Prices would touch below $1.50 per pound before the end of the decade.
* Increasing commodity prices coupled with a weakened US dollar helped copper prices regain traction and head higher through 2010, 2011 eventually reaching a new high of more than $4.60 per pound.
Key terms for this market include:
Smelting - the use of heat and/or chemicals to extract metal from ore
Alloy - a solution of two or more elements/metals into another metal
Whether for forming tools for everyday living, coins or architectural and infrastructure applications, copper use is global. Highlights of copper applications are as follows:
- Prevention of algae growth in water reservoirs and pools
- Fungicide in agriculture
- Electrical wires, water pipes, plumbing fixtures
- Appliance components
- Industrial machinery
- Communication devices
- Supplements for livestock and crops in copper deficient areas
- Pots and pans, weaponry, musical instruments, electroplated coinage, and more.
Important fundamental factors for copper price include economic conditions as well as supply conditions. Like other metals, any political or social issues in the country in which copper is mined can also affect price and volatility. Beyond these concerns, you may also wish to consider the following:
Environmental Issues: Mine waste and possible water pollution has often led to controversy over mining operations. Emissions from smelting and refining are also areas of concern and either of these may cause producers to have to review procedures and practices.
Key Industry Reports: Like many other markets, copper stockpiles or supply and demand data can have significant impact on the market. The International Copper Study Group releases a monthly bulletin and the NYMEX has fact sheets that are worth reviewing.
Potential World Supply: Like oil, copper has a “peak” theory which suggests that production will reach a maximum level and then decline as it is a finite resource. This information would have to be balanced against knowledge of the available copper for recycling as well as the possibility of substitutive metals i.e. aluminum was used in place of copper for wiring during certain periods.
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