Copper Prices Continue to Break Records

Chart of the Week for May 5-11, 2006

For years, copper prices traded within a narrow range. Then in 2004, prices began to rise and are now at more than double their 2004 level. Last summer, the Chart of the Week about copper mentioned that prices were hovering at multi-decade highs. Analysts then were predicting a slowdown; however, aside from small fluctuations, prices have continued to climb.

The reason behind this phenomenon continues to be a simple case of supply and demand. Copper is used widely in areas such as construction, electronics, and automotives, but global inventories are now at very low levels. In recent weeks, this effect has been pronounced with new record high prices being set daily due to supply disruptions and mining problems. Analysts feel inventories will continue to fall in the short-term but that prices might not rise much further. Since supply cannot be easily increased, producers may turn to substitute materials.

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