Global copper market forecast indicators to monitor


The objective of this article is to identify the indicators to monitor so that copper market (supply, price) can be forecasted better.

Section 1 : Major factors influencing copper price

1 . List the major factors influencing copper price
2 . List the risks to monitor in the short term
3 . List the risks to monitor in the long term

Section 2 : Predictors of copper price

1 . List the predictors (indicators), their influence percentage and timing (When they will affect) which help predict copper price

Section 3 : Current Copper price

1 . Give the current copper price and the date to which it relates
2 . Give the reference sources including online sources where the current copper price can be ascertained.

Section 4 : Forecast on Copper market

1 . Enumerate the latest forecast by reputed sources on the copper prices for the near term and long term and the critical factors to monitor the validity of the assumptions.

Major factors influencing copper price

Global Economic activity:

Developments in the world economy have a strong correlation with movements in the copper price. Trends in Chinese GDP growth (and, to a lesser extent, US and EU GDP growth) and world trade play a major role. The correlation with China is the key factor in this context. China accounts for the largest share by far of global copper consumption (about 40% of the world's copper).

Usually, most of the demand for industrial metals comes from developed nations. As more countries transition into the developed stage, you can expect that the demand for copper would rise globally.Transitioning into being a developed country means higher industrialization and urbanization. The demand for copper has surged in recent years as result of urbanization in emerging markets like China and India.


Copper mine supply

Significant portion of global supplies of copper come from South America, supply disruptions – or the fear of it – in the region can affect global prices a great deal. For instance, events like strike at mining sites and natural disasters – landslide, for instance – are quite common in the region. All of these events that threaten supplies from the region can push prices higher if they occur. Chile and Peru combined account for about 40% of the world’s proven copper reserves – and about 42% of the world’s total copper production.    

Copper Scrap availability:

In 2015, ICSG (International Copper study Group) estimates that 29% of copper usage came from recycled copper. A sharp drop in the supply of scrap copper during the financial crisis, amid a tumble in prices helped to spur the recovery in the copper market. Scrap copper supply tends to slow when the economy slows, meaning that there are fewer offcuts from manufacturing and people tend to replace air conditioning systems and cars less frequently.

Key Drivers of the Global Copper Scrap Market

  • Expanding Copper Mine Production and Refined Copper Substitution
  • Industrialization and Economic Growth
  • Prices
  1. Copper Scrap Prices and Spreads
  2. Refined Copper Prices and the Demand for Scrap
  • Chinese scrap market developments
  • The Shift in Regional Scrap Processing Capacity
  • Regulations on Recycling and Trade
  • Technology


The activity of speculators can influence the futures price of copper, perhaps away from where fundamental alone would suggest, at least in the short term. 

Copper Stock levels:

Rising copper stock levels should be indicative of a weak market, as supply exceeds demand. It is normal for prices and inventory levels to generally move in opposite directions.  When copper producers don’t like the market price and think that they can get a better one by waiting, they put their production into warehouse storage and wait for better times.  When prices rise up to or above a price level that the producers like, copper starts coming back out of inventory and onto the market.  So watching copper inventory levels can give us insights about where the producers think a fair price is.


Substitute effect:
 In order to reduce productions costs, industries that make use of copper have sought cheaper metals that can be used in place of copper. For instance, aluminum is now used in power cables, electrical equipment, automobile radiators and cooling tubes. In summary, the more the availability of substitute metals, the more the pressure that would be on demands for copper, which would make the metal cheaper.

Oil prices:

The refining of copper is above all an energy intensive process. Energy costs account for approximately 30% of the total cost of extracting the ore, and these costs can rise to 50% during the processing of the ores (smelting and refining). When the oil price rises, energy costs will go up, and the copper price may rise too.

US Dollar:

Like most internationally traded commodities copper is priced in US dollars. At its most basic a decrease in the value of the US dollar relative to a commodity buyer’s currency means that the purchaser will need to spend less of their own currency to buy a given amount of the commodity. As the commodity becomes less expensive demand for the commodity rises, resulting in an increase in the price and vice versa.

Copper prices have a relatively high inverse correlation against the dollar of around -0.45

Predictors of copper price

Indicators - China:

As the biggest copper consumer (around 40%), china drives the global copper industry.

Chinese real estate indicators according to the data released by National Bureau of China. 

1. Land area purchased by real estate enterprises:

Purchasing land is generally a prerequisite before building can occur. The land area purchased by real estate developers is a leading indicator of construction activity.

In the first nine months of 2017, the land area purchased by the real estate development enterprises totaled 167.33 million square meters, was up by 12.2 percent year-on-year, and the growth rate was up by 2.1 percentage points over the first eight months in 2017. The total transaction of land reached 814.9 billion yuan, increased 46.3 percent, and the pace of growth rate went up 3.6 percentage points.

Given that there was more land area purchased for future development, the construction industry in China (EWT) is improving. Improvement in chinese real estate sector would positively impact chinese copper demand as Copper is widely used in producing plumbing material. It’s used to make taps, valves, and other bathroom fittings. Copper is also used in water pipes and fire sprinkler systems.



2. Sale of Commercial buildings in China

In the first nine months, the floor space of commercial buildings sold stood at 1,160.06 million square meters, a year-on-year increase of 10.3 percent, and was down by 2.4 percentage points over the first eight months in 2017. 

Although the growth rate of commercial buildings sold year on year is positive the growth rate per se when compared to 2016 is down. This shows that the chinese real estate commercial building sales growth rate is not encouraging given that copper finds its way into buildings during the final stages of construction, in plumbing material and electrical fittings.



Chinese real estate climate index:

This index measures the aggregate business activity related to land purchase and real estate.

Figures above 100 indicate economic growth, while readings below 100 indicate a slowdown in the Chinese property market.

In September 2017, the chinese real estate climate index (the value released from this year was after revised by the based period) was 101.44, up by 0.02 month-on-month. The index is in a slight upward trend.


Chinese Fixed Asset investment:

Chinese fixed asset investment grew by 7.3% year on year in October 2017. This is lower than last year's year on year growth rate of 8.3% for corresponding metric. Investment in manfacture of electrical machinery and equipment grew by 7.7%. Copper is ofcourse widely used in electrical equipment.

These figures indicate that growth rate of copper demand in china is not picking up.


Investment in electricity production and supply:

Investment in the production and supply of electricity and heat generation  saw a YoY decrease of 0.4%. Electricity generation and the transmission sector are among the major users of copper. Lower investment in these sectors is negative for near term copper demand.

China's car sales:

The automobile sector is a major consumer of both steel and copper products. China is the world’s biggest automotive market.Copper is used to produce radiators, motors, brakes, and bearings. According to estimates, copper content in an average mid-sized vehicle totals 50 pounds.

For the first ten months of 2017, the production and sales of passenger cars in china were 19,553,000 and 19,502,000 units respectively, up 2.3% and 2.1% year on year, 2 percentage points lower than the overall growth.

china's refined copper production:

China is the largest producer of refined copper in the world. China (FXI) accounts for over a third of global refined copper production. Chile (ECH) is the second-largest producer at the refinery level, and Japan is the third-largest.

China’s refined copper output in September 2017 rose by 6.8 percent from a year ago to its highest level since December 2014 as per the National Bureau of Statistics.

Copper imports in China:

China is the largest refined copper producer, but it lacks copper mineral deposits. It has to import unprocessed copper ore and copper scrap. Analysts track the imports of these materials as an indicator of future refined copper production in China. 

Copper mining is concentrated in Latin America (ILF). From there, it’s shipped to Asia, where more than half of copper is consumed. 

Copper trade

China is the largest importer of copper ore, anodes, and refined copper. Chile, on the other hand, is the biggest exporter of these products. Japan is the second-largest importer of copper ore and concentrates, and India is the third-largest. These countries process copper ore into refined copper.

China's import of refined copper till October 2017  (2585397 MT) declined 13.6% year on year.

China's  import of copper concentrate (13934036 metric tonnes) increased  2.96 percent. China's import of copper scrap (3023011 metric tonnes) increased 12.3% year on year. The slight increase in copper concentrate imports is positive sign for copper miners whereas the decline in refined copper imports and increase in copper scrap imports is negative sign for refined copper producers.

Chile's Copper production:

As the largest copper producer and exporter, Chile’s (ECH) copper production data are closely analyzed by analysts. 

Chile’s copper production grew 13.3% in October 2017 from a year earlier, helped by increased ore processing rates.

Peru's Copper production:

Peruvian copper production decreased by 2% year on year in October, mostly affected by lower volumes from some of the country’s largest mines.

Output totaled 214,311 tonnes in October, compared with 218,685 tonnes in the same month of last year, according to figures from Peru’s energy and mines ministry, MEM.

US consumer confidence index:

consumer confidence hit new 17 year high

The Conference Board's measure of consumer confidence rose to 129.5, the highest mark since the index hit 132.6 in November 2000. Economists polled by Reuters anticipated a decline to 124, after October registered 126.2.


Daniel Acker | Bloomberg | Getty Images

Shoppers look at clothes in a Vineyard Vines store at the Fashion Outlets of Chicago mall.

Consumer optimism ripped higher in November, building on historic highs set in the previous month.

The Conference Board's measure of consumer confidence rose to 129.5, the highest mark since the index hit 132.6 in November 2000. Economists polled by Reuters anticipated a decline to 124, after October registered 126.2.

"Consumer confidence increased for a fifth consecutive month and remains at a 17-year high,"

Positive signs

Greater consumer confidence is positive for the copper industry. It’s one of the reasons driving higher housing and automotive sales. And these two industries are two major users of copper.


US Auto sales:

While sales have slipped in 2017, they’re down only about 1.5 percent through the first 11 months of the year. 

The average estimate among 11 analysts and economists surveyed by Bloomberg News is that sales will slide to 16.7 million cars and light trucks in 2018. The industry is on pace to sell almost 17.3 million vehicles this year.


US housing stats:

Housing Starts Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,290,000. This is 13.7 percent (±10.5 percent) above the revised September estimate of 1,135,000, but is 2.9 percent (±10.1 percent)* below the October 2016 rate of 1,328,000.

Housing Completions Privately-owned housing completions in October were at a seasonally adjusted annual rate of 1,232,000. This is 12.6 percent (±12.2 percent) above the revised September estimate of 1,094,000 and is 15.5 percent (±11.7 percent) above the October 2016 rate of 1,067,000. S


US job market:

Nonfarm payroll employment rose by 261,000 in October after changing little in September, the unemployment rate edged down to 4.1 percent.. Over the past 12 months, employment increased by an average of 167,000 per month.Another strong and positive influence on consumer confidence.

Higher consumer confidence is also positive for the consumer appliance industry. Copper is widely used in the manufacture of electrical equipment.

Current Copper price

copper price is 6645$ in LME as on 5th December 2017

Reference source for current copper price:

Forecast on Copper market

  • After growth of almost 6% in 2016, world mine production after adjusting for historical disruption factors is expected to decline by around 3% in 2017 and grow by 2.5% in 2018:
  • World refined production is expected to increase by only 1% in 2017 with growth of 2.5% expected for 2018:
  • World apparent refined usage is expected to increase by around 1% in 2017 and 2% in 2018:
  • World refined copper balance projections indicate a deficit of about 150,000 t for 2017 and 105,000 t for 2018

Expect copper prices to further strengthen as market deficit widens to ~300 kt in 2018 end

• Chinese demand likely strengthening on the back of shift in grid investment towards copper intensive urban distribution

• Supply growth likely to remain constrained: higher risk projects coming online in 2018 end, labour renegotiations in Chile, and greater geopolitical risks from Zambia, DRC, and Indonesia

• Electric vehicles and associated charging infrastructure could offer significant longterm demand, but difficult to assess now and substitution remains an ever-present long-term risk

References :

Major Uses of Copper: Usage by Region and End Use Sector, 2016
Source: International Wrought Copper Council (IWCC) and International Copper Association (ICA)

National Bureau of Statistics of China