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.
Copper price
First and foremost, price of copper is a key determinant of demand and when price goes down, demand …show more content…
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 higher demand generally pushes up commodity prices. Therefore, copper demand is price elastic.
Generally, copper prices are shaped by economic factors including the dollar, inflation and production plan. Commodities have a negative correlation with the USD because most commodities are sold in USD. This means when dollar depreciates, commodity price will go down. (O’Hara 2015).
Demand for final products
Another factor is demand for final products such as cable, computer, cell phones, telecommunication, construction, electronic devices, and transportation including planes, trains, and automobiles. According to the survey done by Copper Development Association, copper application is generally divided in to three areas: electrical (65%), construction (25%), and transport (7%) (Bell 2016).
Government …show more content…
Average annual growth of global copper consumption was 3.1% between 1995 and 2005 and down to 2.8% between 2005 and 2015. Out of these, the most influential countries for downward price were mature economies including EU-28, Japan, US and Canada whereas Chinese average annual consumption growth was declined from 12.5% (1995-2005) to 10.3 % (2005-2015) and Indian level was down to 4.6% (2005-2015) from 9.8% (1995-2005). The total annual growth of BRICS was down to 8.4% (2005-2015) from 11.7% (1995-2005). Japan is the second largest one, which imports 5,131 Kt from Chile, Peru, Australia, Canada and etc. While total import of Asian countries accumulated to 16,904 Kt, European countries imported 3,058 Kt. This means immense demand of Asian region. In 2015, consumption growth across the BRICS declined to 1.8% as result of mainly slow economy of China and contractions in Russia and