Copper ABC

INTERESTING FACTS ABOUT THE COPPER MARKET.

WHETHER CATHODE OR WIRE ROD – COPPER IS A MUCH SOUGHT-AFTER RAW MATERIAL.

Copper is currently the most important industrial metal. Whether for cables, transformers, electric motors or in information technology – the copper requirement rises continuously.

The fact is: Strength of global economy and copper consumption are closely interlinked and have a direct influence on the available quantity and on the price at the raw material stock exchanges. The London Metal Exchange, called the LME, is the relevant trading venue for the European market.

COPPER CONSUMPTION

The demand for copper is currently on the rise again. The upswing of electromobility will certainly boost the demand for copper in the years to come.

Almost half of the copper mined worldwide is still processed in Asia, whereby China adopts a key role as a copper consumer here with a share of more than 48 percent. The worldwide largest centres for the production of electrical appliances as well as for the electrotechnical industry are located in Asia – with upward tendency.

COPPER MINING

The most important copper producer is Chile, followed a long way behind by Peru and the USA. In Europe there are noteworthy reserves in Poland, Portugal and Sweden.

SPECIALIST TERMS ABOUT TRADING AT THE METAL STOCK EXCHANGE AND THE COPPER MARKET IN A NUTSHELL: THE COPPER ABC

The language of brokers is rather special. If you are not used to the jargon on the metal exchange such as the LME in London, terms like price hedging and many others may overwhelm you. By providing this copper ABC we would like to contribute to a better understanding.

A

ASTM

American Standard for Testing Materials. Official body in the USA for the determination of standard values for the purity of metals and of standards for sampling and analysis.

B

Backwardation

Designation of the price for prompt or nearby dates as opposed to three-month or later dates. There is no restriction on backwardation. (Backwardation such as Contango (see there) might be particularly high or low for various days within the period involved; they must not progress in a linear manner from spot to three-month.)

Bars

see Wirebars

BSI

The British Standards Institute, the official body in Great Britain for the determination of standard values for the purity of metals and of standards for sampling and analysis.

Brand

All exchange-traded metals must be registered in terms of a trademark as a “good delivery” by the LME Committee. (Listed Brand) Various specifications of qualities of the brand of a certain smeltery or refinery can usually be recognised by different markings.

Bull

Someone expecting increasing prices.

C

Cash

An LME contract billed on the following day.

Cathode

Electrolyte copper with at least 99.99% CU in the form of a cathode. Intermediate product for the manufacture of wire rod, for example.

Comex

Commodity Exchange. New York metal exchange

Contango

Price for three-month or later dates as opposed to spot or close delivery dates. It represents the costs resulting from interest, warehouse rent and insurance for the period in which the metal is stored for the customer. There is, therefore a limit for the Contango.

D

DEL listing

German electrolyte copper listing for guiding purposes. Value converted based on the official listings at the LME. Basis of many copper billings in Germany.

F

FED

The Federal Reserve System, Fed or FED for short is the central bank of the United States. It is also commonly called the Federal Reserve, although the institution consists of numerous other banks. It performs the same tasks as the ECB (European Central Bank) in Europe and steers interest rate policy. It therefore also influences the copper price on the market.

H

Hedging

Coverage of a future obligation for delivery of physical metal by entering into an opposing obligation on the stock exchange for the same quantity and the same date. Losses on the one side are balanced by gains on the other side.

Holdings

see Stocks

I

ICSG

International Copper Study Group is an intergovernmental organisation of copper producing and consuming nations that acts as an international commodity authority for copper. It is intended to make the copper market more transparent and to promote international discourse about copper.

K

Kerb

Trading between ring members in the ring or on the floor – and therefore public, but outside the official midday or unofficial afternoon sessions, but observing the formal codes of conduct. The term originates from the time when negotiations continued on the street after the trading sessions at the LME.)

L

LME

London Metal Exchange.

Long

Forward purchase on the stock market, through which the person involved goes “long” in metal for a certain date. This may be speculative in expectation of increasing prices, in order to resell the long position at lower prices, or it may be coverage of exchanges for an opposite obligation for delivery of physical metal.

Lot

Quantity unit for trading at the LME. 1 lot = 25 to.

M

Metal exchange

Metal exchanges at which a liquid market for copper exists. Are situated in London (LME) and New York (Comex). The prices at the Comex are principally valid for deliveries in the North American markets, those of the LME for the rest of the world.

MK listing

Listing for copper issued by the Company Kabelmetall.

P

Pre-market

Transaction of the ring members between one another or between ring members and their customers, which are concluded by telephone prior to the beginning of the official ring session. (Premarket)

Pricing

Use of the official LME listings or their average for a certain period as the basic price for physical metal.

Prompt date

The day (always a workday), on which an LME contract matures.

Purchasing managers' index

The purchasing managers’ index (PMI) for the manufacturing sector is a proven leading indicator of economic development. The PMI is often used to identify trends in the overall economy and contains information on business, employment, orders, inventory and price trends in industry. The PMI is derived from surveys of purchasing managers and company directors and is considered one of the most important economic indicators because it can be used to map a country’s economic development from several perspectives at an early stage.

R

Ring

Place in the London stock exchange building of the LME where the official trading session is held. (The metal dealers sit on a red leather couch in the shape of a ring)

Ring trading time

The ring trading times for copper are as follows: 12.00-12.05 / 12.30-12.35 15.30-15.35 / 16.10-16.15 (These times refer to the local time in London)

S

Semis

Semi-finished metal product such as tubes, rods, etc.

Settlement Price

The official spot seller price at the end of the second ring of the official midday stock exchange. Used as the basic price for physical metal transactions concluded outside the LME. Also used among other things as the basis for the calculation of the DEL listing.

Short

Short sale forward, opposite of “long”.

Stocks

Metal on warehouse warrant in an official LME warehouse. The LME stocks, whose total volume or change is published on a daily basis, are not owned by the stock exchange but by the holders of the warrants.

Storage facility

see Warehouse

W

Warehouse

Roofed storage room with appropriate safety provisions, which has been registered by the LME as an official LME storage facility after inspection. Meanwhile there are licensed LME warehouses all over the globe.

Warrant

A document issued by a licensed LME warehouse, by means of which the ownership of a certain quantity of metal is assigned to the person named on the front page of the warrant.

Wire bars

Electrolyte copper in the form of wire bars in standard dimensions (unit weight 90-125 kg.) Is only produced in very few countries.