copper market report real

7/27/2019 Copper Market Report Real

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Kieron Kader U67

Copper Market Report

Most copper ore is mined or extracted as copper sulfides from large open pit mines in porphyry copper deposits. In 2005, Chile was the top mine producer of copper with at

least one-third world share followed by the USA, Indonesia and Peru. Copper has been

used in the last 10,000 years, but more than 95 percent of all copper ever mined andsmelted has been extracted since 1900. As with many natural resources, total amount of

copper on Earth is vast. However, only a tiny fraction of these reserves is economically

viable, given present-day prices and technologies.Copper is a finite resource, but, unlike oil, it is not destroyed and therefore can be

recycled. Recycling is a major source of copper in the modern world

Companies in Industry

The main companies that are present in the market are:

Anaconda Copper

Antofagasta PLC

CodelcoCollectively they hold approximately 68% of the worlds copper production.



Kieron Kader U67

Barriers to Entry and exit

Barriers to entry in this market are high, predominantly due to the nature of production of

commodities. As more copper sites are found, the chance and ability of any firm findingnew sites diminishes. This is especially harder for new firms who have not invested a lot

of money into research and development into finding locations where there is likeliness

to contain economically viable copper.An industry that produces goods requires raw materials. This leads to buyer-supplier

relationships between the industry and the firms that provide the raw materials.

Depending on where the power lies, suppliers may be able to exert an influence on the producing industry.

Government legislation and land rights are often extremely difficult to secure and harder

for new firms to enter. Additional barriers to entry would be high sunk costs inadvertising to increase the brand identity and reputation to enter a market.

There are also some barriers to exit such as proper closure of the mines, mainly due for

health and safety reasons. Some trans-national corporations have been criticised for short-

term depletion of resources and improper phased exit.

Product homogeneity and branding

The copper product itself is very

homogenous. All firms extract the samesubstance and then sell it on to companies

that have very different uses for them such

as wiring (approx 92% of copper mined is

used), piping, electromagnets, solders,electrical machines and many more.

There is branding however through the

corporation selling to major firms. Industriesrequire certain orders and volumes and they

would trade with the brand and their

reputation so they get their reliable supply.

Knowledge

Knowledge about copper market is imperfect and low. Despite many knowing the general

processes involved with finding copper, the trading and ability to locate the mines isrelatively unknown. It would be difficult for someone to decide start up a copper

production company without having good knowledge about the market. Although the

major firms are all known about and information about them could be easily obtainedthrough websites and company reports.



Kieron Kader U67

Prices

The copper market has been less prone to the cyclical price fluctuations; this is typical of many commodities. As shown by the graph there has been a large increase from May

2005 – Feb 2008.

Profit

The major firms in this market are globally very major corporations and have in the past

gained super-normal profits. New technologies have enabled firms to produce morecheaply, therefore profits would increase and a scarcity of copper mining sites has not yet

occurred, therefore there isn’t supply led price increase.

Efficiency

Efficiency tends to try to be productively efficient for production and many firms exploit

cheaper labour for mine workers. These larger firms are likely to have accumulated

several economies of scale as they have grown a lot in size.

Possible TheoryThere is little evidence yet of sustainable demand for metals emerging after the recession.The maintaining view is that real demand follow-through in developed economies may not beclear until mid-2010. – The Economist.

Given that a few firms hold the vast majority of the copper industry I think that this is an

oligopolistic market.

copper market report real

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