Copper is used in everything from wiring to wind turbines—and green mandates in America, Asia and Europe will soon demand many more of these. But the market is decidedly cool. What is going on?
Right now, however, the train is not so much derailed as chugging along happily. Having peaked at $10,700 a tonne in March last year, copper prices at the London Metal Exchange have dropped by around 10% since January, to $8,300 a tonne. Spot prices remain on par with or higher than those for delivery in three months, suggesting that investors do not expect them to bounce back soon.
Yet the lack-of-demand story does not fully explain the price fall. Despite the country’s construction slump, China is using 5% more copper this year than last, possibly because the metal—used to form cladding, pipes and roofs—tends to track building completions, which have held up, rather than housing starts. A 7% jump in the making of cooling units in anticipation of a hot summer also supports demand.
At the same time, financial investors are snubbing copper. As interest rates rise, they prefer to hold cash-generating assets rather than commodities, which yield nothing. For much of this year “non-commercial” net positioning on copper-futures markets has been in the red, implying that more investors are betting prices will fall than recover . Yet today’s prices remain $2,500 a tonne above production costs at the marginal mine, notes Robert Edwards of, a consultancy.
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