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What Factors Determine Copper Prices?

By Ken Black
Updated May 16, 2024
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Factors affecting copper prices include supply, demand, pressure on commodity markets, and current stockpiles already in place. Given these variables, and the fact that many operate independently of the others, the volatility copper often experiences is something many expect to continue for the long term. While these factors lead to a wide range of copper prices over time, there are influences that also affect each of these areas and contribute to the overall price to a lesser degree.

One of the biggest factors affecting the price of copper is the demand. Copper is a material used in a great deal of applications, including new construction and remodeling. If economies are growing, then the demand for new construction, and more copper, also grows along with it. Building, for example, accounts for approximately half of all copper use, with engineering accounting for nearly 25 percent, and electrical applications accounting for approximately 17 percent. Growth in Asian economies in particular, which account for 50 percent of all copper use, is another important factor.

Another factor affecting prices is the supply. While supply may increase or decrease over time, the trend tends to show an overall decrease in the amount copper being mined. Copper production comes mainly from America, Europe, and Asia, which combine for more than 90 percent of the copper produced in the world. As less copper is produced, the more precious of a commodity it becomes, and thus the higher copper prices tend to be. Counteracting this effect is the mining of more copper, finding new stores of copper, or finding other price-competitive materials that can take the place of copper.

The increase in various hedge funds that have a focus, or at least a partial focus, on commodities also affects prices. The managers of these funds look at data and try to determine supply and demand figures. While this obviously has a real-world correlation, such funds can increase volatility in copper prices, especially in the short term. In the past, prices tended to change more gradually, but there are more spikes, both high and low, in the current marketplace.

To help offset some of those pressures on the price of copper, stockpiles may be used with more regularity. In fact, copper stockpiles had reached their lowest levels in six years in 2010, which led to higher prices that year. As long as demand continues to outpace production, then copper prices will likely continue to remain high. Using existing stockpiles of copper is only a short-term solution to pricing pressures, however.

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Discussion Comments
By SteamLouis — On Nov 15, 2011

@anamur-- Actually, demand has not been consistent, it has gone up. Copper is used for so many things, from construction, to transportation and electronics. The demand for it is high, but is growing more and more because many nations in the world are still developing.

China, India and Brazil were under-developed nations several decades ago and look at how far they've gotten now. They're headed to be some of the wealthiest and most populous nations of the world. What this means is that we're going to need more and more copper which is going to drive prices up.

Even though copper might not be something that's going to disappear soon, many of the copper resources are yet to be discovered. So I don't think that we can supply copper as fast as demand is increasing for a very long time.

By serenesurface — On Nov 14, 2011

@burcinc-- But if companies have control over the supply of copper in the market, and demand has been consistent over a period of time, why can't we predict the price of copper?

I think if we know what these companies are planning to do, we can know how the prices will be in the near future.

And I don't think the earth is going to run out of copper anytime soon. I know that in the US, we've only used about half of all of the copper resources so far. So I don't think that the price will go up much more than what copper prices are today.

By burcinc — On Nov 14, 2011

I guess the factors that determine the price of most commodities in nature also determine the prices of copper.

Supply and demand in the market and stockpiles are factors we talk about all the time in my economy class. My teacher taught us that when demand rises but supply remains the same, then prices will go up. If demand goes down while the supply stays the same, the price will fall.

Stockpiles are important too, but as far as I understand, how stockpiles impact the price of a commodity is kind of tricky. The reason is that even if there is lots more of an element in nature, it won't affect the price unless it enters the market. Countries and companies have rights over stockpiles and control how much of the commodity will be made available in the market and when.

So, copper prices like all element prices are pretty unpredictable. We know what the current copper prices are, but we can't say for sure what it will be like in three months.

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