SCM 546 Strategic Procurement

Assignment 2
Varun Tiwari

Date 28th Oct 2015

Commodities and their markets Copper

Copper is a highly useful metal found in the Earths crust in the form of native
copper or minerals such as copper sulphides, copper carbonates or copper
oxides.1 Due to its unique properties copper finds its use in many applications
such as in electrical wires, roofing & plumbing, transportation vehicles and
industrial machinery and equipment.2 The percentage uses of copper in various
application is represented in graphical form in the Exhibit 1. Copper deposits are
found in abundance in the eastern part of Americas, Central Asia, Australia and
few parts in Europe. Chile, Peru and Australia have the largest deposits of copper.
Exhibit 2 shows the sources of copper across various geographies.
Copper is traded as commodity across all the major exchanges. Exhibit 3 shows
the historical prices of copper as commodity that was traded in the last five
years. According to the data, the prices have fallen down after reaching peak in
2011. This is due to the decrease in the consumption of copper due to slowing
down of certain sectors and geographies which drive the demand of copper. The
prices are majorly influenced by the demand in the electrical equipment
manufacturing and building construction industry, which form the majority
portion of the consumption/demand for copper.
China leads in the industrial and electrical equipment manufacturing in which
copper is used. Also due to the rapidly growing economy in China and India, the
building construction industry also grew rapidly. This pushed the demand of
copper higher and along with it the prices also rose. Recently China as well as
India has experienced a slowdown in the economy affecting the manufacturing
and building industry, hence there has been a decrease in the demand growth of
copper. This has contributed to falling copper prices.
Due to the rapid expansion of housing, manufacturing and electronic equipment,
the production of copper followed the demand albeit with a lag. The upward or
downward scaling of the mining and production of copper is slow. Hence these
trends cause fluctuations in the prices of the commodity.
Majority of the global supply of copper is fulfilled by South America. 3 The region
is not extremely stable politically or socially. Labour strikes, changes in the
political fabric in the region are very common and also it is prone to natural
1
2
3

https://en.wikipedia.org/wiki/Copper
http://geology.com/usgs/uses-of-copper/
http://commodityhq.com/education/four-little-known-factors-driving-the-price-of-copper/

SCM 546 Strategic Procurement

Assignment 2
Varun Tiwari

Date 28th Oct 2015

disaster. Such incidents can lead to supply disruptions causing the fluctuations in
the prices of the commodity.
There is also a threat of substitution which can affect the prices of copper
globally. If copper is replaced by an alternate material, the demand of the
commodity will fall affecting the prices also. Aluminium can substitute copper in
power cables, electrical equipment, automobiles, and cooling tubes.

This

substitution also has affected the demand of copper and thereby the prices of
the commodity.

Exhibit 1: Uses of copper in US (2011) breakup (Source http://geology.com/usgs/uses-of-copper/)

Exhibit 2: Global Copper Deposits (Source http://geology.com/usgs/uses-ofcopper/)

http://commodityhq.com/education/four-little-known-factors-driving-the-price-of-copper/

SCM 546 Strategic Procurement

Assignment 2
Varun Tiwari

Date 28th Oct 2015

Exhibit 3: Copper prices (Source:

http://www.tradingeconomics.com/commodity/copper)

I, Varun Tiwari, affirm that I have neither given, received, nor witnessed
unauthorized aid on this deliverable and have completed this work honestly and
according to the professors guidelines.