By Adinah Brown

Trading copper sounds like the kind of thing our grandparents would have done, along with investing in industrials like the Great Pacific Railway Company, buying bonds in the electric company or buying huge houses for the cost of a bag of chips. It sounds like a kind of depression era industrial material that should no longer exist in a world of microchips and SaaS.

But then you hear stories from real estate investors about vandals stripping the copper piping from abandoned houses. It sounds like a joke, but it is truly serious. Copper piping is stolen from abandoned houses, because of the high street value. Copper vandalism is an actual thing because copper is in high demand.

It turns out that copper is more than whatever it was used for back in our grandparent’s days. Copper is used in electrical wiring, alloys, batteries, saxophones, coins, even the Statue of Liberty. The Copper Development Association (CDA) has categorized their uses into four main categories, construction, transport, electrical, and other. Because of the broad use of copper alloys, copper is actually used as a general indicator of economic health.

Looking into the future use of copper, it appears that it is something that will continue to be utilized. Much of our current technological output relies on existing copper infrastructure. And its versatility and use in so many different products is like a diversification of income streams. Even if one product switches to a different metal or alloy, the remaining myriads of products will ensure that demand is not significantly impacted.

Obviously, despite the significant amount of uses, supply and demand impact the price of copper significantly. In 2016, copper prices hit lows of $2.30-2.40 a pound mainly due to oversupply. Prices moved above $3 per pound in late august, but dropped on news of US North Korea tensions and the recent S&P downgrade. The current level of around $2.95 appears to be in flux, with many investors expecting that further drops will occur if the US share market does go into slowdown and China decreases demand.

For most people, the practical way to trade copper is not through copper futures, but rather through companies whose income is derived from copper related activities, like trade or sourcing the metal. Copper is sold in lots of 25,000 troy pounds, a level which can be prohibitive for most people.

Trading on companies that are involved in copper production or products depend heavily on supply side economics, requiring attention on the part of the investor to determine which of the aspects will be most profitable. In general, these elements can be broken down into companies that mine copper ore, shipment, refinement, production of copper alloy or manufacturing of copper products. The largest copper producer in the world is Freeport McMoRan (FCX) which extract copper from a variety of different mines around the world, whilst also mining a diverse range of other raw materials. Another element of its diversification is to produce certain copper products, allowing it to help offset low copper prices or demand for raw materials.

About the Author:

Adinah Brown is a professional writer who has worked in a wide range of industry settings, including corporate industry, government and non-government organizations. Within many of these positions, Adinah has provided skilled marketing and advertising services and is currently the Content Manager at Leverate.