Copper price history: should you add this industrial metal to your investment portfolio?
13:00, 27 May 2020
Investors tend to focus on the precious metals – gold, silver, platinum, palladium – to diversify their portfolios beyond stocks and bonds. But base metals – particularly copper – offer the opportunity to profit from industrial development, especially in countries such as China and India, and the growth of the electric-vehicle industry.
Copper is used extensively in the construction and automotive industries because it is resistant to corrosion, flexible and has the highest electrical conductivity of any non-precious metal. Demand for copper is rising in developing countries as they build factories, commercial and residential property.
The adoption of electric vehicles (EVs) is driving demand for copper wiring, which is used much more extensively in EVs than in conventional vehicles. Copper is also widely used in electronics and renewable energy equipment, including wind turbines and solar panels.
If you are new to the metal, this article provides an overview of copper historical prices to give you the context of the copper price in commodity market trends you need to know to make your investing decisions.
Copper price history: how have prices moved in the past?
One of the first metals ever excavated, copper has been used in tools and coins for millennia. As a primarily industrial metal, “Dr Copper” as it is known, is seen as a leading economic indicator because it is sensitive to the broader economic cycles and geopolitical events that affect consumption. Prices tend to spike during economic booms and in wartime, as demand for copper-containing products rises. Meanwhile, prices typically decline during recessions, while supply increases due to economic downturns.
Copper price history data indicates that the market trended higher during the 1960s and 1970s on a combination of economic growth in Japan, the Vietnam War, the oil crisis and the broader commodities boom. Prices fell during the 1980s recession, then began rising towards the end of the decade. Demand from China grew during the 1990s, and China overtook the US as the world’s largest copper consumer in 2002.
Copper is primarily traded on the London Metal Exchange (LME) in Europe, the Comex in the US, and the Shanghai Futures Exchange (SHFE) in China. Exchange warehouse stocks provide indications of the availability of the metal, suggesting supply and demand trends. Rising stocks point to increased supply or reduced demand, while a drawdown in stocks reflects rising demand or a fall in supply. Copper is traded in the US dollars per ton or per pound, making it responsive to the value of the dollar and the cost to buy the metal with other currencies.
The copper historical chart shows that the Comex copper price climbed by 488 per cent from $0.66 per pound to $3.88 per pound between 2002 and 2008, before the global financial crisis caused the market to plunge by 67 per cent to $1.29 within the space of a few months. But the copper price history 10 years ago shows that as demand from emerging economies rebounded above pre-crisis levels, the metal’s price rose, reaching an all-time high of 4.63 per pound in early 2011 at the peak of the 2000s commodities boom.
What is your sentiment on Gold?
What drives copper prices today?
In recent years, there were expectations that copper prices would rise on infrastructure investment in China and the US, although prices came under pressure from the fallout of the US-China trade war.
On the supply side, declining quality of the copper ore mined largely in South America has increasingly affected production, as have labour disputes with miners – particularly in Chile, which accounts for around one-third of global mined copper production. Neighbouring Peru accounts for 12 per cent of global production and anti-mining protests disrupted copper output last year. Production in Chile, Peru and China has been disrupted again in recent months with the Covid-19 pandemic forcing mines to halt operations.
The copper price history 1 year shows the market was trending higher towards the end of last year in response to the phase one trade agreement between the US and China. But prices started to fall in January, as reports of the increase of Covid-19 in China began to spread. The copper graph shows that the Comex price dropped from $2.87 per pound at the start of this year to $2.10 per pound in the late-March commodities sell-off, with disruptions to demand from China and then Western countries as the pandemic spread pushing the market down.
The official Chinese manufacturing purchasing managers' index (PMI) slumped to a record low of 35.7 in February from 50 in January. A number below 50 indicates a contraction in activity. The JP Morgan global manufacturing PMI dropped to 39.8 in April, its lowest level since March 2009, and was even lower at 35.8 excluding China.
The copper price graph shows prices have since begun to rebound as the industrial activity has started to return in China and its imports have risen. China imported 2.03 million tons of copper ore and 461,000 tons of refined copper in April, up by 22 per cent and 13 per cent, respectively, from April 2019, according to official customs data.
Global automotive production has been hit hard by the Covid-19 pandemic, with factories halting their operations and vehicle buyers not visiting showrooms to make purchases during government-ordered lockdowns. Chinese vehicle production declined by 45 per cent year on year during the first quarter, according to data from the China Association of Automobile Manufacturers. But output rose by 2.3 per cent in April after factories returned to work.
The Chinese government is investing heavily in the electric vehicle manufacturing industry, extending subsidies by two years as it seeks to stimulate the economy – which has only become more urgent given the impact of the pandemic on economic growth. China reported a 6.8 per cent decline in GDP in the first quarter, its first contraction in decades.
In the longer term, rising electric vehicle production is expected to increase the demand for copper. Battery-powered electric vehicles contain around 183 lbs of copper, compared with 18-49 lbs in conventional fossil-fuel-powered vehicles, according to the Copper Alliance. An electric bus uses a massive 814 lbs of copper. Copper is also required in the wiring of electric charging stations. With most developed countries pledging support for EVs to reduce carbon emissions, the Copper Alliance expects copper demand in EVs to climb to 1.74 million tons in 2027, up from 185,000 tons in 2017.
How should you invest in copper?
Copper investors should follow trends in the construction, automotive and electronics industries for indications as to the level of the copper demand, and monitor the state of supply – particularly from South America. They should also follow the broader drivers that influence prices, such as economic growth and geopolitical developments.
Investors need to be particularly alert to the heightened volatility in the commodities markets given the current uncertainty about the global economic outlook.