The And Current Demand Of Copper Essay example
Prior to looking at the Mongolian copper industry, the world copper market must be studied. Based on the economic fundamentals of supply and demand theory, global demand has shown an increase over the last few decades but recently market has a surplus, which will be investigated in the following sections.
There are several factors are influencing the demand of copper: copper price, demand for final products, government policy, consumer taste, technology, substitutes and global economy. These parameters are taken into account for further assessment of the future perspectives of the market.
First and foremost, price of copper is a key determinant of demand and when price goes down, demand for substitutes will increase. Aluminium can replace copper for high voltage energy cables. In reverse, price of close substitute can also change the demand of copper.
Copper price was fluctuating at $0.6-$1.5 per pound between 1989 and 2004 and since then it climbed up to $3.5, followed by several fluctuations and peaked at $4.5 in 2011. After that, it moderately plunged until it reached $2 in 2016 (Figure 2).
Figure 2: Copper price history Source: Infomine.com
When prices are high, producers will ramp up production, which then leads to lower prices. Alternatively, consumption will go down when the price increases and as a result of that price will lower. Also, substitutes will lower the copper demand and price as well. The…