What Market Fundamentals Can Affect The Copper Futures?
In free market economies,
supply and demand is the primary enabler for price movement. Any outside forces that affect supply and demand eventually affect
prices. When you are considering a trade in the copper market some of the basic fundamentals that you should consider are:
1. Supply The major refining nations include the United States, Japan, Chile,
Canada, Zambia, and the European Union. Copper and copper alloy scrap compose a significant share of the world's supply. The
largest international sources for scrap are the United States and Europe. Chile, Indonesia, Canada and Australia are the major
exporters while Japan, China, the European Union and Philippines are the major importers. World copper mine production through
exploration of new mines and expansion of existing mines is a major factor that affects copper supply and pricing.
2. Supply Disruptions Strike periods that occur with expiration of labor contracts have a significant effect on copper prices. Additionally, earthquakes, shipping problems,
and political unrest in Chile, Peru, and South Africa can cause a decrease in supplies of copper and cause copper futures
to rally.
3. Demand The largest refined copper-consuming nations
have long been the industrialized countries with large manufacturing bases. The major copper-consuming nations are the European
Union, the United States, Japan, Russia, and China. Since the 1950's, the trend has been toward increased consumption by the
Asian countries, particularly Japan, South Korea, and Taiwan, mainly to support export-oriented fabrication industries. More
recently, China has become a major user of copper and accounts for an increasing amount of demand for copper.
4. Inventory Stocks LME and NYMEX are the two international markets where copper trades.
Changes in the inventory stocks in LME and NYMEX warehouses provide future price direction for the copper market.
5. Copper Supply Reports The main report for copper futures is the
Copper - High Grade Warehouse Stocks. This report indicates whether copper supplies are increasing or decreasing.
These are just some
of the basic fundamentals to keep in mind when you are considering a trade in the copper market. Therefore, before opening
up a commodity account to trade copper you should consult with a licensed commodity broker that follows the copper market
to discuss investment strategies.
