Copper is the third most widely consumed metal after steel and aluminum. Copper is the name of a chemical element in the periodic table with the symbol CU which is derived from the Latin term cuprum. Its atomic number is 29 and it is a metallic element with high ductile, thermal and electrical conductivity. Pure copper is soft and malleable and its part which is exposed to air is in red to orange color.
Copper, because of its numerous applications for the manufacture of widely consumed products, is highly important. From the late nineteenth century the importance of copper was doubled because of its close link with electricity. Copper is used in production of copper wire, copper pipe, electrical magnets, electromagnetic engines, Watt’s steam engines, electrical plugs and relays, vacuum tubes, cathode ray tubes, military industries, etc. For the same reason the amount of its consumption has increased by 20 folds in less than a century. Of course convictions that copper has treatment power and its medicinal properties are a different topic of discussion.
Global copper deposits
There are open and underground copper mines in the world and currently a major portion of the world copper is extracted from open mines with lower costs as compared to underground mines. Presently the world’s most important copper mines are located in Canada and Mexico in North America, Chile and Peru in South America, Iran, Kazakhstan, Uzbekistan, northern Siberia, Japan and Indonesia in Asia, Poland, former Yugoslavia, Spain, and Norway in Europe, Zaire, Zambia, South Africa and Uganda in Africa, Queensland and Bougainville in Australia. Meanwhile, the Codelco Company of Chile by holding about 18% of the world reserves has the highest share in its possession.
Parts of Iran are located on the world’s copper belt which runs from northwest up to the southeast of Iran. Copper mines of Sarcheshmeh and Meidouk in Kerman and Songun in East Azarbaijan are among the most important copper mines in Iran. However, streaks of copper can be detected in other parts of the country such as Khorasan.
China, Chile and Japan have the highest amount of refined copper production in the world. India is the third copper producer in Asia. China is the world’s largest consumer of copper followed by the United States and Germany. In Asia after China, Japan and South Korea have the highest amount of copper consumption.
Since the base metals are highly affected by global economy, the factors related to macroeconomics (such as economic growth of all countries possessing effective economy, indicators showing the growth of industrial production, statistics on formation of major world economies, trade balances, indicators on the extent of development, etc.) are all measured with price fluctuations and consumption of basic metals such as copper and in some cases are referred to as indicator of economy or barometer of the economy of the world today.
Some factors affecting world price of copper
As mentioned above, fluctuations in base metals are considered one of the economic indicators. Some of the factors that cause these fluctuations will be discussed briefly below.
1) Change in major world currency exchange rates such as US dollar, euro, yen and yuan. Since the base price of copper is in US dollar, basically a weak dollar may cause increase in purchases by countries that use other monetary bases such as China and Europe.
2) Global demand for copper: Supply and demand are the main factor in creating fluctuations in the price of copper. When financial crises are in the process of formation, demand for copper will immediately reduce and at the time of development demand for the substance will quickly increase. However, calculations show that copper consumption is still rising and growing at 4.5% annually.
3) Macroeconomic indicators: Economic indicators of top economies such as industrial products of the US and China that are known as one of the most important factors for purchasing managers are indicative of the safety of economy and the more the indicator grows the more price of base metals will increase. Always positive growth of figures on jobs, estate sales and housing in the US has positive effects on the price of copper.
4) Arbitrage: That means the difference between the sales price on the London Stock Exchange and on Shanghai Stock Exchange. Each time the prices in the Shanghai Stock Exchange are higher than the London Stock Exchange, it would promise rising prices. The reason for this is because of increased imports by China and the growth in demand in the market.
5) Change in interest rates: Increase in interest rates will lead to lower prices for metals.
6) Extent of supply: Increase in supply of copper in the world will result in lower prices. This phenomenon occurred from 1969 till 2002 and caused investors to abandon the copper market. Considering the growing demand for copper and the experience of previous years, it is unlikely that this would happen again. Meanwhile, large-scale projects in the field of production of copper are not under implementation so that their opening would seriously change the cycle of supply and demand.
7) Emergence of substitute products: Today the speed of technological developments is so high that any time emergence of a substitute product at a lower price and better properties in the market is possible. This risk widely exists in the case of high consumer products such as copper and aluminum. Of course such an event will be mutual and in return there is the possibility for new applications of these products.
In 2014, among other base metals copper had the weakest performance and continued the same trend in 2015. In late December 2014, the price of copper fell to its lowest during the past 4 years. The price of copper for delivery in three months with 2% decline reached $6136 for each ton in the Shanghai Stock Exchange.
Analysis of copper market in recent years
Meanwhile, the future delivery fell 8.1% and dropped to $6145 per ton which has been the lowest price from 2010 up to date. The price of copper fell about 14% in 2014 and from the beginning of the year 2015 has dropped by 6.2%. Economic analysts consider return of copper price in the downward channel and in the short-term unlikely. Since May 20 so far, copper stocks on the London Stock Exchange reached its highest degree. Reports published by the US which show the country’s desirable economic situation has strengthened the US dollar index and the drop in oil prices, caused pushing price of major base metals downward.
Also remarks by some manufacturers indicate decreased production level, including Olympic Dam BHP in South Australia which has announced an output cut of 60 to 70 thousand tons of copper in the current year due to periodical maintenance. However, a number of other manufacturers, particularly newcomers to the market, have announced increased production. The International Copper Studies Center forecasts a growth of 7% in production in 2015 on the basis of which copper production will reach 20 million tons per year. Production of this red color metal in 2014 as compared with 2013 made a 3% growth and increased from 18.101 million tons to 18.644 million tons.
Copper industry in Iran
Some scientists and archaeologists believe that copper was first discovered and used in Iran. Archeological explorations and research works conducted to develop mines show that people of this homeland not only used raw copper materials in this millennium but were, according to technologists, the ones who for the first time melted natural copper and copper stones. In the third and fourth millennium BC the industry of melting copper was practiced in many parts of Iran. In Ilam 3500 BC, in Kurdestan, Lorestan since the second millennium BC and in Khorasan since the third millennium BC copper has been used.
In Iran, a point where the oldest information about copper smelting has been obtained is the Sialk ancient hill in Kashan. From Dr. Girishman’s excavations in Sialk a number of pre-history tools have been obtained which are clearly older than the oldest examples unearthed from the Devil’s Hill.
In the opinion of T. Wertime, the oldest Iranian copper mine is Talmesi near Anarak. It is widely believed that people of Sialk in Kashan supplied their demand from this mine. Copper and gunmetal devices unearthed in different parts of the country as a result of archeological research works indicate that exploitation of copper mines has been a common practice in different eras.
But in modern times the peak of industrialization of Iran’s copper date back to identification and exploration of the large Sarcheshmeh Copper Mine. Sarcheshmeh Copper Mine, 160 km southwest of Kerman and 50 km south of Rafsanjan, is situated in the central area of Zagros Mountains. Sarcheshmeh Copper Mine is considered as one of the largest complexes of mining industry of the world and is the largest copper producer of Iran.
The archeological reserve of the mine is over 1,200 billion tons of sulfur ore with an average alloy of 0.7%. Sarcheshmeh Copper Mine in terms of geology has been placed on the global belt of copper and its expansion area from southeast to northwest is an elliptical range with the dimensions of 1200 x 2300 meters and a depth of 1612 meters.
Mineral structure in this region is in the form of multiple tissues (porphyry) and the stone of the region is of granodiorite type and the time for its formation is about 25 million years ago. With the development of the region and increased exploration in the country favorable copper areas were discovered in Azarbaijan of which Songun Copper is an example. Iran possesses a large number of small-scale copper mines which are mostly run by the private sector. In central parts of Iran and in Khorasan and Semnan several copper mines have been explored.
In the calendar year 1363 (1984-85) production of Iran’s cathode copper amounted to about 300 tons per year until 1372 when it increased to 72 thousand tons annually. This figure, 10 years later, increased to 146 thousand tons and in 1390 (2011 – 2012) reached 235 thousand tons per year. In the past year, Iran’s copper production fell to 188 thousand tons per year due to the reduced alloy of the mine.
IMIDRO is implementing a plan for comprehensive updating of Iran’s copper in an effort to support development of this industry and create the required infrastructures and will unveil the plan during the current year. Due to the relative advantages of Iran’s copper industry, including several copper mines, proximity of the mines to international waters, skilled and trained forces in the metallurgical industry of non-ferrous metals, especially copper, experienced university graduates, access to energy, low wage costs, etc. it can be claimed that Iran is a good place for investors interested in copper market.
Meanwhile, part of copper produced in Iran is exported as cathode. Turning the substance into downstream industries with high value added for sale inside Iran, in neighboring countries and other parts of the world can bring good profits to investors. Iran’s copper industry is considered one of the most attractive industries which has the backing of government as well.