Commodity Watch: Copper

Globally the demand for copper is increasing with its wide uses in industries. The global market for copper has recorded a growth rate of close to 4% in FY 06, in India this growth rate is near 8% and in China growth is in double digits. It is amazing to see that these rates do correspond to the GDP growth rates.

The Copper along with other base metal commodities like Aluminium and Zinc has enjoyed a long bull run. In the 90's there was a global bear market for Commodities (base metal & precious) and many copper mines did not expand their production capacities due to low demand. Now due to high demand for Copper the mines are running a full capacity and developing new capacity. But still the demand cannot be met because of long gestation period for new mines; it takes atleast 10 -15 year to explore and set up new capacity. The same is true for other metal commodities. This is the reason why we are witnessing a huge bull market for metal commodities.

Percentage change in Copper prices

One week  - 4.1%
2 month    - 11.5%
6 month    + 51.44%
One year   +100%

From above you could see that the copper eventhough still in bull (1 year) has lost a lot in last few months. On Friday the Copper was trading at $ 6,780 per tn compared to close to 8,000 few months ago. This price decline could be attributed to the 6.8% increase in the production of copper to 17.5 million tns compared to the 16.5 million tn consumption. It is to be noted that there are two ways for increase in production of copper one by minning another through recycling. According to analysts due to the cappacity bottle-neck the copper industry would expand in the other side of minning (recycling). Already close to 75% of copper production is through minning rest 25% from recycling.

Through analysis of Copper we could se that the commodity bull cycle (usually 10 year long) that started 5 years ago would continue. But in short term it is very difficult for copper prices to breach the 52 week highs set few months ago.