Copper is widely used in industry, for manufacturing high-precision devices, in chemical industry and medicine. Metal is required in large quantities, but stocks are decreasing rapidly. This leads to higher costs, so copper futures are a popular financial instrument for exchange transactions.
Copper futures: what affects interest in metal on the stock exchange
Over the last 10 years, the cost of copper in the global market has increased. One of the reasons is the export of metal to China, where it is widely used in industry. However, the slowdown of the Chinese economy growth rate is also reflected in the copper price. In 2016, there was a collapse in the cost of resources, and by this year the situation has stabilized and a ton of metal now costs 5 thousand dollars. Market experts say that soon the copper price will rise again. Such changes are interesting for investors focused on long-term investments.
Copper futures relate to commodity assets and its analysis requires consideration of demand, supply and resource reserves.
The International Metal Institute has provided data on its global production. Copper production is 22 million tonnes. Inventories of copper on land were estimated at 3 billion tons, while another 700 million tons are concentrated under water. The volume of deposits in the investigated deposits is about 1 billion tonnes. With ever-increasing production needs, the metal could last for less than 200 years.
Russia has 3.1% of confirmed raw material reserves. The country produces 880 thousand tons of refined copper. Domestic consumption is 590 thousand tonnes. Most industries need this metal. Copper is needed to produce 92% of electrical appliances; without it, it is impossible to manufacture electronics. Metal is part of the telephone, computers and other equipment.
Chile is the world leader in copper mining, Peru and China are second and third. Russia is in 9th place in terms of mining volumes.
The trading unit is formed on futures markets. For this raw material it is at the level of 25 thousand pounds. The price of copper depends on the ratio of dollar to metal weight. The change in value is determined in units that are multiple of 0.05 cents per pound. In simple words, $12.5 per contract.
The largest copper futures are observed on the London and Chicago stock exchanges, its turnover in Russia is very small. In transactions, only warehouses, which have been certified and authorized by the Stock Exchange, may supply metal. All of them are located in the USA.
