Is Copper Really an Economic Bellwether?

A Dispatch explainer.

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As rumblings of an impending global recession have grown over the past several weeks, many have pointed to plummeting copper prices as a harbinger of economic doom. These fears stem from copper’s role as an economic bellwether: dropping copper prices are often thought to portend grim economic prospects. But experts aren’t sure just how much copper deserves that distinction.

Copper, which is down 29 percent from its March 4 high earlier this year, is considered a bellwether because of its many uses. Electric appliances, industrial engines and machines, cars and transportation, communications networks, and plumbing and electricity in homes and commercial buildings all have copper as an essential component.  

“When you have a slowdown in industrial production, you have a slowdown in the copper price,” Carlos Risopatron, director of economics and environment at the International Copper Study Group, told The Dispatch. 

Slumping copper prices may suggest that demand for copper is also falling. That could translate to decreased production across the wide range of products and industries that rely on copper. 

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Comments (10)
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  1. Avatar photo
    Earl King

    Many who oppose the term “recession” regarding our last two quarters of declining GDP growth have a point. Not absolute but a point. The 4th quarter was hot, with many stores gearing up for Xmas figuring a big one. The first quarter was left with that overflow of goods on the shelf and elsewhere. So the recession deniers have a point that 1st quarter GDP dip was an anomaly of excess products still on the shelves. What their complaints do not cover is the obvious demand destruction going on in the 2nd quarter. Further demand destruction is happening with gasoline prices....nothing the Biden Administration is doing.

    Copper prices falling are a probably a reaction to the cratering housing market. Copper is an economic indicator of what speculators think the price will be based on demand and supply. Think about our gasoline supply. Falling gasoline prices are evidence of demand destruction not over supply. We have a limited supply of gasoline based on refinery capacity. Not oil capacity. Is copper experiencing a constrained supply, no. It is a canary in the coal mine....manufacturing, construction is slowing...

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  2. Trimline

    The array of factors impacting the price of copper might also include -- over the longer term -- the depletion of higher grade deposits, and the greater energy needed to extract the metal from less productive ones. Look for higher prices even during economic slowdowns, as the transition to cleaner energy will not take a breather.

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  3. Avatar photo
    DougAz

    Research the LME. they set commodity metal prices.

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    1. Avatar photo
      BWG

      Ah ha! I should've known, I've always been highly suspicious of the Labour Movement for Europe, given that they're socialist and affiliated with the UK Labor Party. ;-)

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  4. Avatar photo
    Robert Knudson

    Thanks for the explainer/ My first thought in reading the headline was that China's construction market has sneezed and so the world copper market has a cold. A piece on China's growth and growth prospects would be interesting, as they appear to be seeing a property bubble burst along with continued Covid disruptions. Can't look good for Xi going into his big party conference if this is the case.

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  5. Avatar photo
    Probably Wrong

    Big Copper has the markets wired

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  6. Avatar photo
    MatthewRobin

    Dispatch Explainers & Dispatch Fact Checks are indispensable products that I hope The Dispatch promotes more.

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  7. P Satter

    Interesting article. As a bit of quirky word trivia, a "bellwether" is from the term for the (gelded) ram known as a "wether" that led a flock of sheep with a bell around its neck as the flock was being driven from one place to another. All of the flock would follow the bellwether.

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  8. Avatar photo
    Rjosephpaquette

    In our modern society I personally prefer Aluminum as a bell weather. Full disclosure I own Alcoa stock as an inflation hedge.

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  9. Avatar photo
    EricRemcon@gmail

    Nice dive into the predictive value of cooper. It is surprising to see that the upward/downward trend of something as complex as the US economy cannot be predicted by the price of a single commodity. 😉😉.

    Now grandma can ignore the copper market and go back to using her bunions for investment decisions. 😂

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