It Is Time to Consider Buying Copper

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Source: Thinkstock

Source: Thinkstock

Copper has been crushed in the last two years but has since recovered the $3.00 per pound mark making its way to $3.13. It is now trading in a reversal uptrend technically, but also has strong fundamental sources of demand. First, in my opinion, housing is rebounding and the economy is slowly improving. Eventually, this should translate to increased demand for copper and subsequent favorable price action. A strong indication for copper is that if housing as well as commercial/industrial construction is indeed picking up again, it should serve as another catalyst for the price of copper because residential and commercial construction use approximately 40 percent of the copper in the United States, with direct residential construction constituting approximately two-thirds of the market.

There were approximately 200 pounds of copper electrical wire in the average new home constructed in 2012. Office building copper use can trump this significantly depending on the size of the structure. Don’t forget that these figures do not include the amount of copper wiring that goes into additional home appliances, plumbing, and air-conditioning systems, accounting for more of the demand for copper.

China as a global player is a major source of demand for copper. A United States Geological Survey reported a total reserve base, in 2005, of 1.6 billion tons of recoverable ore, of which 950 million tons was considered economically recoverable. Given current world demand of 15 million tons, much of it coming right from China, recoverable copper may be exhausted in slightly more than 60 years. Global copper consumption is expected to grow by 1 percent to 2 percent annually, on average. Refined copper demand reached 20.4 million tons in 2011 compared with global production of 16.1 million tons for the same time period.

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