How to trade copper: a quick guide

Copper is called the "king of green metals" because of its usage in multiple applications- from batteries, electrical traction motors, solar PV technologies, wind turbines, and not least the electrical grid required to deal with the electrification of the world. In this guide we provide some examples of how to invest and trade copper, while highlighting some of the key drivers dictating the price.

Here are some of the main influences that can affect the price of copper:

• Supply and demand dynamics: The fundamental principle of supply and demand plays a significant role in determining copper prices. Increased demand for copper, particularly from industries focusing on electrification, transmission, electronics, and EV's can drive prices up. The green transition has become an increasingly important driver behind copper demand growth, occurring at a time where miners are struggling with higher input prices from fuel, construction material and labour, as well as lower ore grades requiring more materials to be dug out of the ground to retrieve the copper. Also, rising regulatory and start-up costs for new projects have led to a prolonged period of mismatch between increasing demand and inelastic supply.

• Weather and natural disasters: Extreme weather events like hurricanes, floods, and earthquakes may significantly disrupt copper mining and transportation infrastructure. This can affect supply negatively and in turn drive up prices.

• Global economic conditions: Copper is widely used in construction and manufacturing, so its price is sensitive to changes in global economic conditions, not least in major economies, such as China and the United States.

• Monetary policy: The policies of the US Federal Reserve significantly influence the price of commodities, including industrial metals such as copper. If interest rates rise, this can cause a price negative period due to destocking, while the opposite may be the case when interest rates fall.

• Investor sentiment and speculation: Like other commodities, copper prices can be influenced by investor sentiment and speculative trading in commodity markets. Factors such as geopolitical tensions, trade disputes, and macroeconomic policy decisions can affect investor perceptions and lead to price fluctuations.

• Green transformation: The global transition towards renewable energy sources and sustainable technologies is driving a significant increase in demand for so-called green metals, not least copper, often called the “king of green metals” given its use in multiple clean energy technologies. In addition, increased demand for power, increasingly also from the focus on AI will lift transmission, and with that, demand for copper towards expanding the grid.