High Grade Copper Nov '24 (HGX24)

Description

The word copper comes from the name of the Mediterranean island Cyprus that was a primary source of the metal. Dating back more than 10,000 years, copper is the oldest metal used by humans. From the Pyramid of Cheops in Egypt, archeologists recovered a portion of a water plumbing system that had copper tubing in serviceable condition after more than 5,000 years.

Copper is one of the most widely used industrial metals because it is an excellent conductor of electricity, has strong corrosion-resistance properties, and is very ductile. It is also used to produce the alloys of brass (a copper-zinc alloy) and bronze (a copper-tin alloy), both of which are far harder and stronger than pure copper. Electrical uses of copper account for about 75% of total copper usage, and building construction is the single largest market (the average U.S. home contains 400 pounds of copper). Copper is biostatic, meaning that bacteria will not grow on its surface, and it is therefore used in air-conditioning systems, food processing surfaces, and doorknobs to prevent the spread of disease.

Copper futures and options are traded on the CME Group and the London Metal Exchange (LME). Copper futures are traded on the Shanghai Futures Exchange. The CME copper futures contract calls for the delivery of 25,000 pounds of Grade 1 electrolyte copper and is priced in terms of cents per pound.

Prices - CME copper futures prices (Barchart.com symbol HG) rallied to a 1-1/2 year high of $4.3145 per pound in January 2023. Protests at copper mines in Peru, the world's second-largest producer, threatened 2% of global copper production and boosted prices. Copper prices were also supported by hopes for increased copper demand from China as it reopened its economy from the pandemic. However, copper prices fell back into mid-2023 as China's recovery was weaker than expected due to the country's ongoing property crisis. Copper prices perked up into July after the dollar index tumbled to a 1-1/2 year low. Prices then reversed and fell to a 1-year low in October of $3.53 per pound. The tepid global recovery curbed copper demand and boosted supplies as LME copper inventories rose to a 2-year high in October. Also, the International Copper Study Group (ICSG) projected a global 2024 copper surplus of 467,000 MT, a 10-year high. Copper prices recovered into year-end on speculation the US Federal Reserve had finished with its cycle of interest rate hikes. Copper prices finished 2023 up +1% yr/yr at $3.8805 per pound.

Supply - World production of copper in 2023 rose by +0.5% yr/yr to a record 22.000 million metric tons. The largest producer of copper was Chile, with 22.7% of the world's production, followed by Peru with 11.8%, China with 7.7%, the US with 5.0%, and Russia with 4.1%. US production of total new copper in 2023 fell by -6.8% yr/yr to 850,000 metric tons, far below the record US production level of 2.140 million metric tons seen in 1998.

Demand - US consumption of refined copper in 2023 fell by -1.2% yr/yr to 1.700 million metric tons. The primary users of copper in the US are wire rod mills, followed by brass mills.

Trade - US exports of refined copper in 2022 fell by -41.5% yr/yr to 27,810 metric tons. US imports of copper in 2022 fell by -20.3% yr/yr to 732,400 metric tons, below the record high of 1.070 million metric tons in 2006.

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