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, Portfolio123 (1,836 clicks)
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After the dramatic decline of the price of copper by 23.8% from its all time high, $4.632 per lb, on February 14, 2011 to $3.531 per lb, on July 19, 2012; one might ask if an investment opportunity has arisen. In order to find out if now is the proper time to invest in copper, the fundamental parameters of this important industrial metal - demand, supply and reserves - require analysis.

The price of the copper ETN, iPath DJ-UBS Copper (NYSEARCA:JJC) has declined 27.1% in the same period.

Demand for Copper

Copper has innumerable applications due to its unique properties. It is a malleable and a ductile metallic element and an excellent conductor of heat and electricity, as well as corrosion resistant and antimicrobial. Copper is also used to produce the alloys of brass (a copper-zinc alloy) and bronze (a copper-tin alloy), both of which are far harder and stronger than pure copper.

Major Uses of Copper: Usage by End‐Use Sector, 2009 (thousand metric ton)

Source: The International Copper Study Group - ICSG

The total world refined copper usage rose from 4.738 million metric tons in 1960 to 19.885 million metric tons in 2011, while the Compound Annual Growth Rate (OTCPK:CAGR) was 2.85%. The growth rate was greater than the world mine production growth rate, which was 2.80% in the same period.

Source: The International Copper Study Group - ICSG

World Copper Consumption by Countries, Years 1998 -2010

Source: Copper Development Association

The International Copper Study Group - ICSG, released its Copper: Preliminary Data for April 2012 on July 20, 2012, according to this report:

During the first four months of 2012, world apparent usage of copper grew by 10% compared with that in the same period of 2011, principally owing to strong growth in Chinese apparent usage as world usage ex-China declined by 2.5%. Based on a 100% increase in net imports of refined copper, China's apparent usage grew by 33% in the first four months of the year compared with that in the first four months of 2011 and accounted for 43% of world usage. However, comparative net imports in the first quarter of 2011 were weak and anecdotal evidence suggests that the high import level in the first months of 2012 was accompanied by increased inventories held in bonded warehouses. Usage in the other three leading consuming regions, the EU, Japan and the United States, declined by 7%, 3% and 1% respectively.


Copper consumption has been increasing over the years, especially due to huge demand from China and other Asian markets. Copper consumption has been increasing year over year on continuous demand from all over the world as the developing countries are in need of more copper because of robust growth seen there.

In the 2nd part of this article we will discuss the tendency of copper supply and reserves.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.