A Look at Historical Copper Prices

Sunday January 4, 2015, 7:55pm PST

By Teresa Matich+ - Exclusive to Copper Investing News

 

 

That said, it’s worth noting that copper prices have actually gained $2 over the past 14 years. Although that figure doesn’t account for inflation, it’s still a sizable 243-percent increase. Prices were more or less on the rise during the latter half of the century as well, indicating that the state of the red metal might not be so bad after all.

 

Speaking to some of the factors affecting copper prices historically, Stefan Ioannou of Haywood Securities suggested that it’s most pragmatic to look at copper since the 1970s or 80s, when one key factor brought major changes to the industry: the rise of modern heap leach technology. Leaching has long been used in mining operations, but according to this paper, the method in its modern form started gaining popularity around 1980.

 

“That fundamentally changed the way we mine copper,” Ioannou said. “Up until then, a lot of copper mining was for the most part focused on sulfide mineralization producing a copper concentrate that you’d send to a smelter. With heap leach technology, all of a sudden the giant porphyries [and] the oxidized caps associated with large porphyries down in South America became viable.”

 

That sounds like good news for increasing copper supply, but as Ioannou noted, large-scale deposits are often low grade, meaning that they’re more costly to mine despite relatively cheap heap leaching methods. That’s no doubt had an affect on copper prices.

 

“The change we’ve seen in the industry is that the price of copper has gone up … because the cost to produce a pound of copper has gone up. They sort of go hand in hand,” he said.

 

While the analyst stated that supply and demand dynamics are the main driver behind prices, he also noted that grades and production costs are factors as well. Demand is for copper keeps growing, and Ioannou suggested that since “the low-hanging fruit has been mined,” miners must increasingly go after more difficult, large, low-grade and costly deposits to meet that need.

 

“The price of copper dictates how low you can go on the grade,” he said, “Back pre-1970s, I’m guessing a lot of copper was coming from a lot higher-grade mines … as we’ve been mining more and more of these large-scale deposits that are low grade, the cost on a per-pound basis has gone up.”

 

A number of supply and demand factors have affected copper prices over the years. For example, a report from the US Geological Survey (USGS) notes that the Vietnam War meant strong demand in the mid-60s and early 70s, leading to price controls to limit rising domestic copper prices.

 

More recently, those following the resource market will no doubt remember a giant spike in demand from China that sent many global commodities prices soaring in recent years. As the top copper consumer worldwide, accounting for 40 percent of global demand, there’s no doubt that China has a big impact on copper prices.

 

Of course, there have been a number of downturns as well. The USGS states that in 1998, “[t]he constant dollar copper price in 1998 fell to the lowest level since the Great Depression of the 1930’s,” while an earlier production boom in the 1980s led prices to fall.

 

 

Interestingly, some take another view on the historical performance of the copper price. Richard Schodde, managing director at MinEx Consulting, gave a presentation on the subject back in 2010 that looks at a longer time frame. He came to a different conclusion than Ioannou.

 

Schodde told Copper Investing News by email that real copper prices have dropped 50 percent over the past 100 years, and that production costs have dipped lower in tandem due to economies of scale and advances in mining and processing technologies. Still, he views that as a good thing overall, and predicts that the industry will continue to innovate in order to exploit lower-grade deposits and meet growing global demand for copper.

 

For his part, Ioannou has noted previously that copper prices haven’t yet dropped low enough to cut production out of the market. He’s also suggested that a supply crunch is coming for copper around 2017 to 2018 that could set prices on a rise. Looking at the longer term, given that copper is so widely used, he has no doubt that the world will continue to need more and more of the red metal.

 

“If anything, I think the general consensus would be that the overall global demand for copper is definitely going to grow [over the next 25 years or so],” he said.