Commodity Spotlight | The Fundamental Importance of Copper for World Economic Growth

The chemical element copper is a reddish and ductile metal which is an unusually good conductor of electricity and heat. As metallurgy dawned in Mesopotamia in 4000 BCE, copper was cast to shape in moulds. It was reduced to metal from ores with fire and charcoal that was later alloyed with tin to make bronze. Today, a majority of the world’s copper is used by the electrical industries.

Chile, which produced 28.4% of the world’s copper in 2016, accounts for close to half of the country’s national exports. Copper mining, which takes place in northern Chile and along the Andes of north-central Chile, makes up for 10% of the country’s GDP.

For the past 200 years, copper has been the material of choice for electrical connectors. Since the invention of the electromagnet and the telegraph, the need for copper grew exponentially. Today, copper electrical connectors are used in telecommunications, power generation, distribution and transmission. In homes and buildings, copper has practical uses in pipes and wiring.

The price of copper as a commodity is largely influenced by the health of the global economy. This is due to its necessity in all sectors of the economy, such as power generation and transmission, construction and factory equipment. A rising market price suggests strong economic health, while a decline suggests the opposite.

Outside Chile, the largest copper deposits can be found in Australia, China, Democratic Republic of Congo, Peru, Mexico and the United States. To date, roughly 700 million metric tons of copper have been mined in the world and an estimated 2.1 billion tons of identified deposits continue to remain in the ground.

Copper trades on the London Metal Exchange and COMEX. Prices for the most part reflect expectations for global economic growth. The metal is important as an economic bellwether. For investment purposes, a bellwether is a commodity that is worth watching closely because its earnings suggest a greater economic trend which can point towards an upward or downward trend in particular sectors.

Copper comes in third after gold and silver for jewellers, but tops the list for builders and engineers. Copper’s also plays a key role in the prevailing trend to switch to electric cars. Since the advent of hybrid and battery electric vehicles, the amount of copper wiring used to power an automobile has increased as electric vehicles require more copper than a traditional internal combustion engine. While petrol-powered automobile sales have seen a general decline, sales of electric and hybrid cars have shown exponential growth since their introduction in 2010.

Copper’s antimicrobial properties could also increase demand for its use in high-touch surfaces in the medical industry. Awareness of copper’s natural antimicrobial properties dates back centuries. An Egyptian medical text dated between 2600 and 2200 BCE, records the use of copper to sterilise chest wounds and drinking water. Such evidence has led researchers to believe that copper can not only cure the diseases but also assist in reducing the number of infections. According to the Environmental Protection Agency, copper can kill 99.9 percent of bacteria that lands on its surface within two hours. This is in stark contrast to plastics which are now known to be harmful to both humans and wildlife.

How to Invest in Copper

Much like gold, investors can buy the metal, in the form of bouillon, to save, keep and sell. Commodity exchange-traded funds (ETFs), allow investors to both zero in on a single commodity or group them together for more broad-based exposure. Another option is to invest in a copper-mining company. Investors can also use futures contracts to bet on how a particular commodity’s price will move.

Investing in copper isn’t for everyone. Commodities are generally susceptible to big changes in value and investments should always be made wisely after taking into account an individual’s risk appetite.

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