What is Copper?
Copper is a soft, malleable and ductile metal with very high thermal and electrical conductivity. A freshly exposed surface of pure copper has a red-orange colour. It is used as a conductor of heat and electricity, as a building material, and as a constituent of various metal alloys.
Uses of Copper
In early and modern history copper as a component of coins. Copper also has antimicrobial properties and used on regularly touched items such as door knobs, lowering the transmission of diseases and germs. Copper rotors are also known to increase the efficiency in electric motors.
Copper metal is also being used in the circuitry of silicon chips, as it has the capability to increase the rate in which a microprocessor operates and reduce the amount of energy used.
Copper is an essential component of the following:
- Building construction
- Power generation
- Power transmission
- Electronic product manufacturing
- Copper wiring for telecommunications
- Plumbing for heating and cooling systems
- Bearings used in cars and trucks
Risks of Copper
Like any futures contract, there is always the possibility that the underlying asset i.e. copper will move in the opposite direction to which you hold your contract. E.g. you have taken a long position (expecting the price of copper to rise) if this were to happen and the copper fell in price your long position in corn will decrease in value.
With any commodity, supply and demand will affect the price dramatically if there is a change. This risk is one that should be monitored on a regular basis and adjusted to suit your risk parameters.
Mining of metals has an inherent risk with the level of costs associated with extracting the product from the earth. This can include, but not limited, to the cost of oil to fuel machinery, cost of labour or new tax regulations being implemented.