The Copper Metal Market is Going Bonkers!
At Osborne Mint we watch the metals market like a hawk. We are constantly searching for the best priced silver and copper, so that we are able to offer our best-priced finished products. However, when gold is in the midst of a correction like it is now, investors turn to alternative metals to hedge against gold. That hedge move is obvious today as silver and copper markets are going gangbusters, driving up prices for both metals. As copper is one of our two primary mint metals, let’s take a deeper dive into what is happening with the cost.
In a previous blog we discussed the spot price of metals, specifically silver and how that price fluctuates with respect to the global market. Spot pricing enables traders to treat silver and other metals like commodities and makes it easy to trade across the globe. Read more about silver spot pricing here: https://www.osbornemint.com/from-the-mint/13-0-spot-price-of-silver.
Let’s build upon our previous blog about silver and focus this time on copper, to examine why it is increasing in price and how that increase will affect both you and the mint. Copper is often referenced as “The Economic Barometer” because its price dynamics tend to predict economic market trends. Thus the current copper prices suggest a continued climb in cost.
A Copper Tone
A primary cause for the copper price jump is the increase in demand. Not only is our team here at Osborne Mint trying to accumulate more copper, but China (a huge player) is actively stock-piling copper, along with other metals. In copper alone, China accounts for more than 30% of the global demand. This increases the scarcity of metal on the open market and as we all know from the basics of economics: less availability means more competition and higher prices.
The global pandemic has played a significant role in the availability of copper. Production at the primary mines in Chile and Peru has suffered monumentally as workers were struck with Covid-19, mines were closed for quarantine and reserves were seriously depleted. Digging even deeper, the same mines in Chile that were paralyzed by the pandemic are now being struck by labor disputes, governmental elections and continuation of the lockdown. Similar issues are occurring in Peru, as documented by their 20% drop in production for H1 of 2020 and the continuation of the slide throughout the year, all according to Capital.com
Global copper mining output in the first 10 months of 2020 was 0.5% lower than 2019 levels, according to the International Copper Study Group (ICSG). As 2021 proceeds, the copper supply is predicted to increase as the mines in Russia, Mexico and Indonesia come back online with the aim to counterbalance China’s strong desire for copper as they stockpile for their economic rebound. The ICSG published their predictions in Mining.com, “that copper production levels will come roaring back with 4.6% growth by the end of 2021.”
As we’ve mentioned before, Osborne Mint is committed to only using United States metals for our minting. The United Stated is the world's fourth largest copper producer, after Chile, China, and Peru. Understanding the global production and pricing of copper can provide us a better understanding of the US copper market. The US mines, like all mines across the globe, were adversely affected by the Covid-19 pandemic. Much in the same way the global production of copper is predicted to surge in 2021, the US production levels will surge as well. However, it is also predicted that the levels for demand both in the US and around the globe will indeed climb too. According to Investing News, major US copper-mining companies such Rio Tinto (NYSE:RIO,ASX:RIO,LSE:RIO) and Freeport-McMoRan (NYSE:FCX) are investing billions of dollars in 2021 to build out their US copper production capacity to increasing reserves and improving availability.
What makes copper so special?
Even with the world’s economy returning to some sense of normality as pandemic restrictions lift, the transition is predicted to initially be slow, especially if the pandemic rears its ugly head again and we resort to another lockdown. Regardless of the speed of our return, we are destined to return. Once the global economy begins to rejuvenate the call for copper will increase even more.
Did you know that copper is one of the most utilized precious metals for construction, electricity and green endeavors? All these industries are currently struggling to gather copper ahead of their reopening, getting them prepared to launch at previously unforeseen numbers. We too are trying to gather our share of copper. The US mines that we deal with are receiving requests from other countries for immense levels of copper that makes our ability to purchase modest levels harder than ever.
Construction – Whether adding a skyscraper to the horizon, a new house to the suburbs or even a stadium to the city center, the construction industry has a serious need for copper. These new builds are accruing all across the globe. Because of copper’s malleability, conductivity and versatility this precious metal is considered superior to other metals for the building trade. Consider all the applications for copper in any form of build: electricity (wiring), plumbing (fixtures and piping) and heating, cooling (coils and thermal conductors). The construction industry is a huge consumer of copper and as the economy returns, so will their demand for the precious metal.
Electricity – With aging power grids across our country and the construction component reviewed above, the need for copper to transfer electric power will grow. According to Bloomberg New Energy Finance (BloombergNEF) “The global power grid will grow by 48 million kilometers (30 million miles) by 2050. That’s enough to wrap around the circumference of the earth nearly 1,200 times and equates to a doubling of the copper demand to 3.6 million metric tons. Cities, electrification and copper go together.”
Renewable (Green Energy) – The demand for renewable power generation, battery storage, electric vehicles, charging stations and related grid infrastructure accounts for a whopping fifth of the global copper consumption, according to Citigroup Global Markets Inc. Wind farms are another large source for copper demand. These farms are often built in remote areas, and copper is the conduit that connects the energy they produce with the regions that need it. Electric vehicles are another green energy outlet. As the world strives for zero emissions; the demand for electric vehicles and ultimately copper will skyrocket. It is estimated by the Copper Development Association that there will be 500 electric vehicle models by the end of 2022. What does that mean for copper? Well, in comparison, a conventional car uses 18-49 pounds of copper whereas a battery electric vehicle contains 183 pounds of copper. As predictions for the future amount of electric cars comes to fruition we will see a monstrous increase in copper demand for years to come.
Copper is and will continue to be a very coveted commodity. Manufacturers like Osborne Mint will need to be more than diligent to have any hope of acquiring copper at a decent rate. We know the spike in demand means a spike in pricing.
Current copper items in the Shop-The-Mint catalog are priced at previous copper costs, however as the cost of copper surges, replenishing our copper stock becomes more expensive, in turn making our products more costly to create. I urge you to take stock in the copper market now before it climbs even higher. I am not saying we all become doomsdayers and stockpile copper, but if the investment strategy of buy low and sell high is the key to success, this may be the time to buy?*
For reasons beyond the economics, read our previous blog on copper collecting.
Osborne Mint makes it simplistic to start your copper collection. We continually introduce new and unique copper rounds and ingots that not only become an investment but a conversation starter and collectible keepsake. Visit Osborne’s Shop-The-Mint e-commerce site and see all the available copper designs.
*NOTE: The content in this blog has been provided for informational purposes only and should not be construed as a purchase recommendation or investment strategy.
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