The Economics of Copper

Copper has been used by tribes and civilizations for over 10,000 years. At first, the copper mineral was found in a very pure form, often right on top of the ground in places like Cyprus in the Mediterranean Sea, and Michigan and Canada in North America. This naturally occurring concentrated form is called native copper. As the usefulness of this mineral became more widely known for dishes, jewelry and weapons, it became a material that was more and more widely traded by people all over the world.

Prior to 3,000 BC, the supply of copper was almost never adequate for all the needs people had for it. Because of this, its value increased; and by 3,000 BC civilizations in the Middle East and Asia were actually exploring far beyond their known borders, seeking new sources of copper and the tin and zinc used to make the alloys bronze and brass.

Copper's use in the period from 2500 BC to 1800 AD remained less important since other metals like iron, gold and silver became more prominent. With the beginning of the Industrial Age in the late 18th century, and use of electricity, the new Copper Age began.

Up to the 19th century, copper demand all around the world was relatively limited, and mines in Spain, North America and Europe were small and sufficient to handle the demand for copper. However, with new applications of copper in electric wiring, in light bulbs, and in electrical generation; and its use in building homes and other structures, the search for copper reserves and mine sites increased tremendously.

Arizona became one of the best new sources for copper in the world, and miners flocked to the state to look for the mineral in places like Jerome, Bisbee, Morenci and even throughout the Grand Canyon. The technology and equipment used to search for copper and determine the concentration of copper in the rock began to improve, as did the technology to prepare ever larger mines to satisfy the needs of the new electrical power industry, transportation, and communication.



The economics of copper has changed as well. The time necessary to locate new copper ore bodies, develop a mine site, move in miners, extract the ore, mill the rock to separate the ore from other minerals, and then refine the copper to a purity that would satisfy the needs of the market required a great deal of time and a lot of money. The demand for copper could fluctuate rapidly as new products were developed to use it, and the need for copper as a commodity increased. When people were not buying as many products made from copper, for example during the Great Depression of the 1930's, the need for the metal went down rapidly.

This change in demand or need for copper and the longer and longer time necessary to discover it in the ground and develop a new productive copper supply have made the economics of the copper industry a very difficult and unpredictable activity for mining companies.

It now takes up to 10 years to develop a new productive mine, but the price of copper as a commodity around the world can change significantly in a matter of a few months. This relationship of need for a commodity and its supply is called supply and demand.

For mining companies to make a profit, they must be able to meet the needs of the many industries and customers who require copper by mining the ore and refining it for less than the amount for which they can sell it. In order to do that, they must not produce too much copper when the market demand is low but must be able to provide enough copper to meet the demand when it is high.



Because copper is mined in several key areas around the world and used on every continent, the market for copper today is truly international. The United States must compete with producers in many countries where the cost to develop mines is often lower and where the laws are not as strict about the environment as ours are. This means that U.S. copper mining companies must be more efficient and develop mines that are more economical than mines in other countries.

The graph in Fig. 2 shows how the price of copper as a commodity changed over 36 years. Note how the price changed dramatically, sometimes going up by 100% in 2 years and then dropping by 60% in 3 years. Trends of this type make predicting future investment in new mine development very uncertain.

The cost and time to develop a new mine may be as long as 9 years and require an investment of $50,000,000 or more just to begin producing copper that can be sold to manufacturers as a commodity. It is very difficult to know how much the price of copper will be when this enormous investment of millions of dollars finally yields a working mine. The price of copper may be lower per pound than the cost to the mining company to actually mine and refine the commodity, but people still need copper for houses, for cars, for computers, to generate electricity and to maintain communications all over the world. So the demand for copper as a commodity continues to increase and probably will for decades to come. Demand still drives supply.

	Copper has been used and traded by tribes and civilizations for over 10,000 years.
	Copper ore is mined from the earth; copper as a commodity is the pure form of copper used by industry.
	The cost to develop copper mines is very expensive and requires up to 9 years before mines yield a profit.
	The demand for copper by industry and consumers drives the need for more supplies of copper.
	When the demand for and price of copper plummeted during the Great Depression, Arizona made its license plates from copper to increase the demand and keep miners in the state employed.
	Arizona produces over 1,360,000 tons of copper as a commodity every year.
	The copper industry in Arizona has an economic impact of almost $10,000,000,000 on the state's economy.
	Copper mining in Arizona employs some 12,500 men and women.